Van Rompuy urges EU to push forward with banking plans

Herman Van Rompuy, the president of the European Council, has urged European Union member states and the European Parliament to strike a swift deal on banking supervision plans – and the European Commission to make deeper banking union proposals before the end of the year.  

Van Rompuy said that breaking the “vicious circle” between bank debt and sovereign debt was vital if countries were to recover from the eurozone crisis.  

He was speaking in Dublin after holding talks with Enda Kenny, Ireland's prime minister, to mark the start of the country's six-month presidency of the EU's Council of Ministers.  

Breaking the link between bank and sovereign debt is particularly critical in Ireland, which has been saddled with a €64 billion bill for stabilising its stricken banking sector.  

Kenny said that as president of the Council of Ministers Ireland was determined to push the banking union agenda forward. The establishment of a single supervisory mechanism, as agreed by EU member states last month but needing European Parliament approval, would pave the way for direct recapitalisation of banks by the European Stability Mechanism (ESM), the eurozone's rescue fund.  

Eurozone finance ministers have been given the task of working out whether and how the ESM can pay for Ireland's “legacy” assets, the banking problems that already exist and the state has already paid for.  

Ireland is also negotiating with the European Central Bank (ECB) to extend the period of time it pays for promissory notes – a type of IOU – given to two of its banks as part of their restructuring.  

“We need this deal,” Kenny said. “Solidarity works both ways.”  

He said that without an easing of Ireland's terms, the country would not be able to extricate itself from the tough conditions of the eurozone/International Monetary Fund bail-out programme and make a fully fledged return to the markets to raise money.  

Van Rompuy said he hoped that the Commission would make proposals for common EU bank recovery and resolution arrangements this year. This is expected to prove even more contentious than the single supervision plan.   Van Rompuy and Kenny both played down the likelihood of EU treaty change, either as part of deepening economic and monetary union or as part of the UK's attempts to claw back some powers from the EU.  

“We don't need treaty change to deliver on the deepening of economic and monetary union,” Van Rompuy said. “We can do much of this within the existing treaties.”  

He said that where treaty change was necessary, it would be only after European elections in 2014, if at all, and that there was “no consensus” on what the changes would be. He added: “So there's a possibility, but it's not very high.”  

Kenny added that it would be “disastrous” if the UK were to leave the EU.  

However, in a blow to the attempts of David Cameron, the British prime minister, to revise the terms of the UK's membership, Kenny added: “I don't see situation where we're reopening the treaties for change in the near future.”