The European Central Bank should have the powers to intervene in any euro area bank, European Commission president Jose Manuel Barroso insisted today.
At the summit in Brussels last week, EU leaders agreed to adopt a legal framework by the end of this year giving Frankfurt overall responsibility to supervise euro zone banks.
The introduction of these new ECB powers is a precondition for direct European Stability Mechanism (ESM) aid to banks.
Addressing the European Parliament in Strasbourg today, Mr Barroso said the plan to deliver a single supervisory mechanism would send an important signal to investors and the EU’s international partners.
He said the EU was advancing in its response to the financial crisis but "not all countries felt the same level of urgency".
Mr Barroso said the “negative link” between bank debt and sovereign debt still needed to be "definitively" broken.
Mr Barroso did not refer to the issue of Ireland’s legacy debt or to German chancellor Angela Merkel’s controversial comments on Friday in which she appeared to scuttle Irish hopes of securing a deal to ease its €64 billion debt burden.
Dr Merkel said the ESM could be not used for back-dated recapitalisations of euro zone banks, a long-standing objective of the Coalition.
Her comments caused dismay in Government circles and a flurry of phone calls between Dublin and Berlin which resulted in a joint statement being issued on Sunday by Taoiseach Enda Kenny and Dr Merkel affirming that the “unique circumstances” of Ireland’s economic crisis required a special approach.
In an earlier address to the Strasbourg parliament, European Council president Herman Van Rompuy acknowledged the euro area was still enduring a lack of growth.
He admitted growth projections for next year were “at best modest”.
“I am painfully aware of the toll this is taking on our societies. In several countries the adjustment is more severe and lengthy than many would have expected,” Mr Van Rompuy said.
“However, reining in budgetary deficits and restoring competitiveness would have been necessary even without the crisis in the euro area.”
