Banking Union Must Mean Equal Votes for All Members, Says Bulgarian Minister
By Sam Fleming
All members of Europe's proposed Banking Union must be granted equal voting status to avoid creating distortions in the financial sector, Bulgaria's Deputy Prime Minister argued yesterday.
Simeon Djankov, who also serves as Finance Minister, praised eurozone moves towards a single banking supervisor and the creation of a fiscal compact, saying that "unquestionably" they had made the single currency and Europe as a whole more stable.
Bulgaria has frozen its application to be part of the euro, but Mr Djankov said it was conceivable that it could join within five years if the currency area made further progress. Bulgaria's place was "unquestionably" inside the single currency, he said.
However, he said that the voices of non-euro members such as Bulgaria needed to be properly represented within the mooted single bank supervisor to be located at the European Central Bank. A natural consequence would be that non-euro members of the Banking Union should also gain access to the region's bailout fund during banking crises, he said.
Cyprus, which holds the rotating European Union presidency, circulated a new draft set of proposals on the Banking Union yesterday, aimed at kick-starting deadlocked talks.
Large parts of emerging Europe's banking sector are owned by euro area lenders, meaning that they will be affected profoundly by plans for a single supervisor whether they join the Banking Union or not.
The EU's initial proposals have been criticised for preventing non-euro members from accessing the euro rescue fund — the European Stability Mechanism — even if their banks were subject to the dictats of the single supervisor. The European Bank for Reconstruction and Development, which was set up to lend to former Eastern Bloc countries, has called for non-euro countries to be allowed to opt into the ESM if they also opt into the single supervision mechanism.
The idea of the Banking Union is to break the vicious circle between sovereign debt and the banking systems of European nations, which has threatened to break apart the single currency.
"If there is going to be a single banking supervisor at the ECB or at an institution related to the ECB, which is what is being discussed, everyone should have a vote," Mr Djankov said during a visit to London. "Non-eurogroup members should sit at the table as equals ... If you have equal voting, shouldn't you have access to the ESM? I think it will come naturally as a step."
Mr Djankov said that his country was not seeking euro membership at present as it assesses attempts to improve euro area governance. Bulgaria is particularly concerned about French suggestions that there should be a common tax policy, Mr Djankov said, adding that he was determined to defend his country's ultra-low tax regime.
He also supported Britain's hardline approach to the EU budget talks, saying: "If every country is trying to consolidate [its public finances], the EU should find ways of trying to consolidate as well."
Given that its currency is fixed to the euro, Bulgaria will join the single currency if there is progress on mechanisms such as the Banking Union and if the region implements reforms to address its lack of competitiveness, he said.
Germany has been seeking a heavier influence inside the single supervisor to reflect its larger banking sector and the bigger fiscal risk it would carry in a future crisis. It also wants to retain oversight over smaller German lenders rather than giving the ECB power over all 6,000 euro area banks.
Britain is not joining the Banking Union but is seeking safeguards to preserve its influence within the European Banking Authority.