Originally Posted by Scofflaw
It's normally just called horse-trading. And it's basically why the EU tends to evolve when there's a crisis, because otherwise the variety of national interests trump the need for action.
Oops, posted this on the "what will the Left do" thread but now think I should have posted here:
Talk about horse trading at EU level, the first step, “sine qua non” in the “seismic shift” allowing the ESM to directly recapitalize the banks is implementation of “an effective single supervisory mechanism
Going back to antoobrien’s post #3 (http://www.boards.ie/vbulletin/showt...p?t=2056686110
) - the trade off to the ESM taking over the bank recapitalization piece of our national sovereign debt is more effective centralised banking supervision
Presumably, current national supervisory arrangements are still considered too subject to national interests and hence too risky in the long term.
This key condition, of closer banking supervision, seems like another step towards a much more integrated Europe (and reduced national sovereignty), which would probably have been unthinkable without the current crisis.
As for the immediate short-term cost / benefit impact – a maximum Irish investment of €11.1 billion in the ESM gets us a large chunk of our bank bailout debt of €40.5 billion off our balance sheet and onto the weighted ESM pool of debt. Whether this also involves transfer of ownership of the banks to the centre remains to be seen – please correct me if I’ve got any of these sums wrong!
Extract from 1st paragraph of the brief Euro Area Summit statement (emphasis is mine):
“When an effective single supervisory mechanism is established
, involving the ECB, for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalize banks directly. This would rely on appropriate conditionality, including compliance with state aid rules, which should be institution specific, sector-specific or economy-wide and would be formalised in a Memorandum of Understanding. The Eurogroup will examine the situation of the Irish financial sector with the view of further improving the sustainability of the well-performing adjustment programme”.
For full text see: http://consilium.europa.eu/uedocs/cm.../ec/131359.pdf
The statement goes on to say that “ECB has agreed to serve as an agent to EFSF/ESM in conducting market operations in an effective and efficient manner“ and that “Eurogroup to implement these decisions by 9 July 2012”.