The New York Times said recently:
Last year, European officials laid out an important proposal for a banking union that would resolve failed institutions; provide strong, central supervision of banks; and give depositors a solid guarantee that their money was safe. If carried out fully, the plan could help restore health to the Continent’s depressed economy.
But progress toward a banking union has been delayed by internal divisions within the European Union. In particular, Germany’s stubborn insistence that a banking union must be preceded by changes in treaties threatens to put a full economic recovery off for several more years.
In weak European economies, like Spain, Italy and Greece, banks are increasingly unwilling or unable to lend to businesses and individuals. Many are sitting on piles of bad loans made during the bubble years that are unlikely to be repaid in full. These institutions should be shut down, merged or given more capital. But the governments in these countries, which themselves are struggling to meet European fiscal targets by raising taxes and cutting spending, are not in any position to rescue their banks.
Late last month, European finance ministers took a half-step toward a banking union by agreeing that shareholders and some creditors must accept losses before taxpayer funds could be used to prop up troubled banks. But the agreement, which still has to be approved by the European Parliament and will not go into effect until 2018, would not establish a central European authority to deal with failed institutions. Each national government would be responsible for dealing with its own troubled banks even though many nations do not have the ability or political will to address the problem. It would be far better if policymakers gave that authority to a Pan-European agency, which would be independent of political interference.
The European Central Bank has bought some time by aggressively buying assets from banks, but its intervention is unlikely to turn the economic tide. Unemployment in many European countries is tragically high. And it is difficult to imagine how these economies will ever create jobs without properly functioning financial systems.
- Most Popular
- Most Emailed
- RICHARD'S POOR ALMANACK: On this day 1739, 'Richard Palmer' identified in prison at York Castle as the notorious outlaw DICK TURPIN; IN 1836, Battle of the Alamo begins near San Antonio de Bexar, Texas; 1896, the Tootsie Roll invented by LEO HIRSCHFELD.
- RICHARD'S POOR ALMANACK: On this day in 1472, Orkney, Shetland islands put up as collateral by Norway to Scotland in lieu of dowry for MARGARET OF DENMARK on her marriage with JAMES III, king of Scotland; 1962, JOHN GLENN first American to orbit Earth.
- TOMORROW'S HEADLINES TODAY: City mayoral candidates debate campaign issues; Hartford, Conn., woman still missing; Neal Goswami reports attempts to legislate suicide; local woman loses 100 pounds through TOPS program.
- RICHARD'S POOR ALMANACK: On this day in 1878, JOHN TUNSTALL murdered near Lincoln, New Mexico, by the outlaw JESSE EVANS; in 1930, ELM FARM OLLIE first cow to fly in aircraft, first to be milked airborne; 1955, nuke test WASP; '79, snow in Sahara.
- TOMORROW'S HEADLINES TODAY: Rutland Herald News Editor Alan J. Keays and staff writer Gordon Dritschilo discuss stories planned for the February 18, 2015, edition of the newspaper: Winter budgets maxed, legal marijuana, Springfield bank job, USPS slowdown
- RICHARD'S POOR ALMANACK: On this day in 1249 AD, ANDRE of LONGJUMEAU is dispatched by LOUIS IX of France to meet the KHAGAN, ruler of the Mongol Empire; in 1804, during 1st Barbary War, STEPHEN DECATUR scuttles the pirate-held USS Philadelphia in Tripoli.