Glenis Willmott MEP, Labour Leader in Europe and MEP for the East Midlands
Last week the President of the European Commission, José Manuel Barroso, unveiled plans for a European banking union, which I discussed with Andrew Neil on today’s Daily Politics. After months and months of indecision, ineffective policies, and, quite frankly, incompetence, it seems that finally some positive action might be taken towards solving the crisis in the Eurozone.
So what does a banking union mean? The first step, announced by Barroso last week, will be giving the European Central Bank (ECB) the role of the ‘Single Supervisor’. The Commission wants the ECB to have oversight over all 6,000 or so banks in the Eurozone. It will mean that the ECB could give aid directly to troubled banks.
This could have a number of positive effects. Firstly having one supervisor for the whole of the Eurozone will provide a level of stability and predictability that just isn’t there at the moment. One of the reasons the markets have little confidence in the Eurozone is that every country deals with troubled banks in different ways, and it is hard to know what to expect.
However, most importantly, having the ECB helping banks in trouble will end the vicious circle between failing banks and sovereign debts. When a state bails out a bank, it gets itself further into debt, which in turn further decreases market confidence in that state, and its banks – leading to the downward spiral that we have seen unfurling in many Eurozone countries.
We can see what some of the effects might be for Eurozone countries, but what does any of this have to do with Britain? As the UK is outside of the Eurozone, British banks won’t come under the supervision of the ECB. But that isn’t to say that this isn’t important to us. Over the last few years we have seen time and time again that in this globalised world, and with so much of our trade being done inside the EU, what happens to an Irish, Italian or Spanish bank has direct implications for banks and consumers here in the UK.
We don’t yet know the details of the proposals, and setting up supervision is only the first in a number of steps towards creating a true Eurozone banking union. The negotiations will not be easy, with some reporting that Angela Merkel only wants to see the 20 or 30 biggest banks being supervised, rather than the 6,000 banks of all sizes across the Eurozone. In my opinion, if this policy is really going to be coherent and effective, surely all Eurozone banks need to be covered
What’s most clear is that Britain has to be at the table when these plans are negotiated. That means all 73 British MEPs debating and voting in the European Parliament, our British Commissioner Cathy Ashton influencing the Commission proposals, and crucially, the Prime Minister and Chancellor being pragmatic in the Council discussions. Let’s hope that this winter David Cameron sees that the best way to protect British interests isn’t to flounce out of the room, leaving Britain’s seat at the table empty, but to work together with our European partners to finally agree some measures that will bring much needed stability to European economies.Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.