Overcomplicated and underfunded. And no definitive break of the link between banks and the sovereign – the verdict of most observers on the EU summit’s agreement yesterday on how to close failing banks. A small, but definitely not decisive, step towards banking union and the mutualisation of debt.
Mañana, mañana. Again EU leaders have opted for their standard operating procedure – do the minimum, never more than the minimum, just in time. And, again, it has to be said, it is German reluctance that is holding us back. While Berlin has agreed to ECB supervision of the EU's banks it continues to balk at a joint mechanism for winding down those that fail.
The summit agreed to create a €55 billion bank resolution fund by levying banks over the course of the next decade. If such funding for rescues proves insufficient, and once creditors take a preliminary hit à la Cyprus, Germany has insisted that member states, not the European Stability Mechanism, will provide further backstops from national exchequers in the initial phase of "banking union". Eventually, perhaps , mutualisation will be possible.
Germany also insisted that the European Commission will not be given the sole right to decide on the closure of banks – that will remain a collective, unanimous decision of the eurozone, a cumbersome procedure described by the European Parliament's President Martin Shultz as akin "to dealing with an emergency admission to hospital by first convening the hospital's board of directors".
The European Central Bank's President Mario Draghi, who had rightly predicted recently that the compromise might prove overly complex and the financing arrangements inadequate, on Thursday insisted that he "strongly welcomed" the deal, calling it an important step towards completion of a banking union. It's called making the best of a bad deal.
Cold comfort, however, for Government hopes to get the leaders to honour their commitment to look at Irish bank recapitalisation from the ESM, now seriously unlikely. Its position has not been helped either by the outburst yesterday by Commission President José Manuel Barroso, apparently sore at the suggestion that the euro itself was to blame for the Irish crisis and the implication that it was therefore up to the EU to recapitalise Irish banks.
Barroso, to be fair, has something of a point. Unregulated, irresponsible banking practices, not the euro, brought us to our knees. But a major part of the single currency rationale was the common view that it would be better for all our currencies, weak and strong, to face into the future together. An injury to one was seen as an injury to all, a logic unfortunately not followed through in the construction of the euro. We are now trying, halfheartedly perhaps, to put that right, and part of that should be a willingness to share in the costs of recapitalisation.