Europe has put the seal to its banking union, the bloc’s central reform to address its financial crisis and the most ambitious integration project since the single currency 14 years ago.
The agreement, the climax of a two-year drive to underpin the euro, will ensure eurozone governments are no longer sole masters of their big national banks.
After a marathon negotiation stretching until dawn, the European parliament and EU member states finally settled terms on the unified system for handling crises.
Lenders will be policed by the European Central Bank, the EU’s top bank supervisor, and wound down by a central authority – if necessary against the wishes of its home state – using a €55bn rescue fund.
Although even the agreement’s architects admit to its imperfections, including its complexity and the limits on its financial firepower, the project is emerging as a lasting legacy from the bloc’s financial crisis. Only last week Yves Mersch, a senior ECB official, said failure to reach a deal would be “very close to suicide”.
The compromise requires building up the resolution fund over eight years, rather than 10. It also ensures that a bigger proportion of the fund is fully shared at an earlier stage.
A protracted stand-off between the European parliament, which was pressing for greater mutualisation and more centralisation, and Germany, protective of its tax-payers, had threatened to delay the final pillar of the reforms.
Other revisions give an enhanced role to the European Commission in approving resolution decisions, while curbing the influence of the EU’s finance ministers, who can only reject resolution proposals under certain conditions.
Time limits are included to enable wind-up decisions to be taken swiftly over a weekend before markets open. The system would still involve more than 100 separate voting decision-makers on multiple panels.
MEPS hailed the compromise, arguing it showed they had the clout to make Wolfgang Schäuble, German finance minister, make bigger concessions to them than to his fellow finance ministers.
Referring to calls between finance ministers in the early hours, Sven Giegold, a Green MEP in the negotiating team, said: “The European parliament is powerful. We can wake up Wolfgang Schäuble at 5.30am – and he actually made concessions.”
Elisa Ferreira, the Portuguese MEP who led the parliament’s negotiating team, said the overall package “guarantees that we have a single resolution mechanism, financed by the banks . . .[with] no political interference”.
Michel Barnier, the EU commissioner responsible for the reforms, said the deal had been won through the “spirit of compromise”.
“The Single Resolution Mechanism might not be a perfect construction but it will allow for the timely and effective resolution of a cross-border bank in the eurozone, thus meeting its principal objective,” he said.