04/06/2012
In an article published by _The Wall Street Journal_ and _ABC_ in October 2011 Aznar already said in 2011 that "Europe Must Share the Burden of Saving Its Banks" He asked for and EU European Deposit Insurance and Resolution Fund, one capable of intervening. Madrid, 04.06.12.-Due to its interest given the current situation, we are recovering the article that Jos? Mar?a Aznar, former Prime Minister of Spain and President of FAES Foundation, published in _The Wall Street Journal_ on October 7, 2011, under the title 'Europe Must Share the Burden of Saving Its Banks'. In that article, reproduced by the _ABC_ next day, October 8, Aznar said that The EU should establish a true European Deposit Insurance and Resolution Fund, one capable of intervening and restructuring banks in all euro-zone countries. Please find below the full article: Europe Must Share the Burden of Saving Its Banks The Maastricht Treaty sought to avoid the scenario of a bankrupt European Union member state, but flaws in the treaty's design and implementation have doomed us to it. This scenario now threatens to plunge Europe into a second wave of recession and banking crises. The question is threefold: What can we do? What must we do? Can we do what we must do? With more official financing and blind eyes toward conditionality breaches, Europe's leaders could prolong the Greek agony for several months. This risks fuelling the delusion that a restructuring of Greek debt can be avoided. It can't. But given the current institutional shortcomings in the euro zone, the EU must still buy time to prevent a default from jeopardizing the euro and the entire European project. The present experience suggests a troubling disconnect between the structure of Europe's banking market and the structure of its banking regulation. National banking markets ceased to exist as such in the euro zone many years ago, as they became integrated into a single European banking market. But despite private financial integration, the public safety net is still fragmented along national borders, making it weak and lacking in credibility. Banking crises in the euro zone are currently handled by national treasuries reluctant to act and poorly prepared to pay, as Ireland's case demonstrated. On top of this, there is a scattered cluster of European authorities responsible for financial supervision and regulation, none of which has executive capacities to prevent and face the costs of such crises. But a change of focus should allow European leaders to transform an international systemic banking crisis into a more local financial crisis, which would still be costly for European taxpayers but should be more manageable. The EU should establish a true European Deposit Insurance and Resolution Fund, one capable of intervening and restructuring banks in all euro-zone countries. Such a facility would enable an orderly default in Greece, preventing a de facto expulsion from the euro zone. Avoiding this is vital to avoiding contagion effects that would have irreparable consequences for the European project. Without a true European safety net, a Greek default, for instance, would immediately trigger a massive bank run in the country. A resolution fund would be able to prepare Greece's financial system for a transparent liquidation following default, and could tender to international financial institutions that have access to ECB liquidity and are capable of guaranteeing Greek deposits. Even with a resolution fund, a Greek default would still entail a cost for all euro-zone taxpayers, who must pay for the ECB's recapitalization. This burden could be distributed under the same protocol that governs the funding of existing European crisis authorities like the European Financial Stability Facility. What we have at the moment is not working, and it will continue not working even after a Greek default. It is not enough for the EFSF to provide financing to national authorities for dealing with supposedly local banking crises that occur within their borders. Euro-zone member states must share the costs of solving banking crises that occur anywhere in the euro area. This is the only way of dealing with the core of the contagion problem. Needless to say, extending a credible European banking safety net to all countries will demand that they share sovereignty regarding banking supervision and intervention. And a safety net is not a panacea. It should not be allowed to enable countries to forget about their obligations regarding fiscal adjustment or structural economic reform. Resolving banking crises is politically complicated, but it is undoubtedly more feasible than creating a single European Treasury. Germany and France ought to see that the Greek crisis is the perfect opportunity to receive contributions from the rest of Europe to recapitalize their banks. But for this to happen their leaders must abandon the idea that they can steer the restructuring of their financial systems by themselves.