Merkel seeks EU regulator after stress test flop

 
Tim Wallace
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GERMAN Chancellor Angela Merkel called for a centralised Eurozone banking regulator yesterday, blasting national regulators for failing to organise proper stress tests.

The demand came as her government demonstrated Germany’s economic strength by slashing its budget deficit target.

She said central authorities should be given more power to impose discipline on member states and to measure banks’ performance.

The existing setup has led to the European Banking Authority’s (EBA) remit being undermined by national oversight bodies acting “out of misguided national pride”, she said, blaming them for last year’s inaccurate stress tests which gave many struggling Eurozone banks a clean bill of health.

“No sooner had we finished the recapitalisation phase of banks from the EBA stress tests when it emerged that the Spanish stress tests were not correct,” she told business supporters.

She also praised Spain for seeking a bank bailout, but stressed that there will be strings attached as the banking system must be restructured.

It came as Germany’s parliament demonstrated the strength of its own economy, voting to lower its budget deficit target to €31.2bn (£25bn) from €34.8bn.

The move was possible because the government benefits from very low borrowing costs, as investors have fled from countries including Spain and Italy, and see Germany as a “safe haven” in which to put their cash.