Germany is opposed to the eurozone’s bailout funds helping banks directly as long as financial sector supervision is carried out at national level, a government source said on Thursday. “The current system, where member states are responsible for their banks, can function only if the responsibility for recapitalization also lies with the member states,” the source said. “We can’t start by having joint responsibility for recapitalisation. We mustn’t start that way round and say: ‘now we can recapitalise banks directly’,” the source said. While some member states argue that banks themselves should be able to seek aid directly from the European Financial Stability Facility (EFSF) or its successor the European Stability Mechanism (ESM), Germany insists that applying for help is strictly a matter for governments.
“Otherwise, the EFSF and ESM would hold a stake, say, in a Spanish bank but would have no right to intervene, which would continue to be held at a purely national level,” the source argued. “Liability and responsibility must be at situated at the same level,” the source said. With a view to the EU summit beginning in Brussels later on Thursday, the source said the bloc already had sufficient weapons at its disposal to fight the crisis and there was no need to draw up new additional measures. Asked whether any decisions would be taken on Greece, the source noted that the so-called “troika” of auditors from the European Union, the European Central Bank and the International Monetary Fund would only be travelling to Greece next week. Thus, leaders would have to await their report before any decisions could be taken about the state of the debt-wracked country. Turning to soaring borrowing costs facing Spain and Italy, the source warned against “exaggerated scare-mongering.”
On Wednesday, Spanish Prime Minister Mariano Rajoy warned that his country cannot finance itself for long at the high rates it now pays on the markets. If Spain, the eurozone’s fourth-biggest economy, is shut out of the markets it could lead to a full-blown bailout for the country with unfathomable consequences for the 17-nation eurozone.
