THE SOLUTION to the Eurozone crisis lies in creating closer economic ties in the Eurozone, European Commission president Jose Manuel Barroso argued in his state of the union address yesterday.
However his plans for a banking union were immediately hit by concerns from German politicians who fear the setup would overstretch the European Central Bank, which is set to take on major new powers.
The proposals would see the ECB take responsibility for financial stability, and give it powers to monitor all 6,000 Eurozone banks.
Germany’s Chancellor Angela Merkel and finance minister Wolfgang Schauble believe this is unrealistic, arguing nations should keep responsibility for small banks.
“The quality and efficiency of the new supervisor must be the focus,” said Schauble. “Purely on practical terms it seems impossible for the ECB to monitor 6,000 banks.”
And lawyers added that the timeframe – new powers in place by January – is also too optimistic.
“The timing proposed is highly ambitious and it would be very surprising to see anything firmly developed before the end of 2012,” said Peter Green from MoFo.