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| Integrating Banks Spurs Last-Minute Fears in Europe | Integrating Banks Spurs Last-Minute Fears in Europe |
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| BRUSSELS — Even as European Union officials put the final touches on a plan for a central bank supervisor, prominent Germans and some leaders in Central and Eastern Europe were trying on Tuesday to modify or delay the proposal. | BRUSSELS — Even as European Union officials put the final touches on a plan for a central bank supervisor, prominent Germans and some leaders in Central and Eastern Europe were trying on Tuesday to modify or delay the proposal. |
| José Manuel Barroso, the president of the European Union’s administrative arm, the European Commission, planned to present the proposal on Wednesday. European leaders agreed in June to a closer integration of the region’s banks, imposing new scrutiny and discipline as a way to help ease the region’s three-year debt crisis. | José Manuel Barroso, the president of the European Union’s administrative arm, the European Commission, planned to present the proposal on Wednesday. European leaders agreed in June to a closer integration of the region’s banks, imposing new scrutiny and discipline as a way to help ease the region’s three-year debt crisis. |
| The main elements of the plan are expected to include transferring regulatory oversight of all banks in the 17 European Union countries that use the euro to the European Central Bank in Frankfurt. The central bank would have the power to fine lenders that did not follow its rules and withdraw the licenses of substandard banks. The new system would begin in January, with all 6,000 euro zone banks required to join by the beginning of 2014. | The main elements of the plan are expected to include transferring regulatory oversight of all banks in the 17 European Union countries that use the euro to the European Central Bank in Frankfurt. The central bank would have the power to fine lenders that did not follow its rules and withdraw the licenses of substandard banks. The new system would begin in January, with all 6,000 euro zone banks required to join by the beginning of 2014. |
| But several countries now fear the devils that some see in the details. | But several countries now fear the devils that some see in the details. |
| Paradoxically, some of the strongest opposition has come from Germany, usually a cheerleader for any measure that promotes economic rigor. But some German officials, including the finance minister, Wolfgang Schäuble, say that the new system should apply only to the euro zone’s biggest banks, the ones that could pose a threat to the entire European financial system. Extending the system to all euro zone banks would lead to greater scrutiny of smaller regional and local institutions as well. | Paradoxically, some of the strongest opposition has come from Germany, usually a cheerleader for any measure that promotes economic rigor. But some German officials, including the finance minister, Wolfgang Schäuble, say that the new system should apply only to the euro zone’s biggest banks, the ones that could pose a threat to the entire European financial system. Extending the system to all euro zone banks would lead to greater scrutiny of smaller regional and local institutions as well. |
| There has also been concern in some of the nations that are in the European Union but outside the euro currency union that the new system might hurt their banks, which would not have access to the central bank’s lines of credit and European bailout funds. Hungary is among the nations most concerned. | There has also been concern in some of the nations that are in the European Union but outside the euro currency union that the new system might hurt their banks, which would not have access to the central bank’s lines of credit and European bailout funds. Hungary is among the nations most concerned. |
| The plan needs the approval of all 27 countries in the European Union. Any delay could be painful for countries like Spain, which desperately needs to recapitalize its banking sector. European leaders have said that direct injections to such banks from the new bailout fund, the European Stability Mechanism, are contingent on the central bank having a lead role in banking supervision. | The plan needs the approval of all 27 countries in the European Union. Any delay could be painful for countries like Spain, which desperately needs to recapitalize its banking sector. European leaders have said that direct injections to such banks from the new bailout fund, the European Stability Mechanism, are contingent on the central bank having a lead role in banking supervision. |
| “The political barriers are nontrivial,” said Roberto Henriques, a credit analyst at JPMorgan Chase in London. “We believe that the target the region has set itself — implementation to begin from January 2013 — is unrealistic.” | “The political barriers are nontrivial,” said Roberto Henriques, a credit analyst at JPMorgan Chase in London. “We believe that the target the region has set itself — implementation to begin from January 2013 — is unrealistic.” |
| On a separate front, the European Stability Mechanism bailout fund’s future could also depend on a decision expected Wednesday morning in Karlsruhe, Germany. There, the nation’s Constitutional Court was expected to rule on whether and under what conditions Germany could contribute money to the fund. | On a separate front, the European Stability Mechanism bailout fund’s future could also depend on a decision expected Wednesday morning in Karlsruhe, Germany. There, the nation’s Constitutional Court was expected to rule on whether and under what conditions Germany could contribute money to the fund. |
| The creation of the single bank supervisor for the euro zone is a first step in what voguish policy-makers call E.M.U. 2.0. The goal is to revise the Economic and Monetary Union — the euro union — by combining cross-border budget management with possibly jointly issued debt and more central economic policy-making, while trying to ensure democratic accountability. Those goals are strongly supported by the German chancellor, Angela Merkel. | |
| How quickly all of this can happen has become a political balancing act for Mr. Barroso and for Michel Barnier, the European Union commissioner in charge of trade. | How quickly all of this can happen has become a political balancing act for Mr. Barroso and for Michel Barnier, the European Union commissioner in charge of trade. |
| In Central and Eastern Europe, there were even warnings on Tuesday about possible bank runs, should depositors flee to the perceived safety of banks under the new European Central Bank regulator. | In Central and Eastern Europe, there were even warnings on Tuesday about possible bank runs, should depositors flee to the perceived safety of banks under the new European Central Bank regulator. |
| National authorities would in fact retain much influence over the new system, including day-to-day supervision of banks and responsibility for enforcing banking rules. In many cases, the European Central Bank would rely on existing regulatory institutions to flag serious difficulties, help assess applications for new banks and oversee adoption of new financial models. | National authorities would in fact retain much influence over the new system, including day-to-day supervision of banks and responsibility for enforcing banking rules. In many cases, the European Central Bank would rely on existing regulatory institutions to flag serious difficulties, help assess applications for new banks and oversee adoption of new financial models. |
| Even so, the plans could do much to remove barriers between national banking systems. And the European Central Bank would have the power not only to fine banks for breaching its orders, but also to carry out inspections and supervise any stress tests to gauge the vulnerability of institutions. | Even so, the plans could do much to remove barriers between national banking systems. And the European Central Bank would have the power not only to fine banks for breaching its orders, but also to carry out inspections and supervise any stress tests to gauge the vulnerability of institutions. |
| The proposals would also modify the powers of another agency, the European Banking Authority, which is needed in part to assure countries outside the euro zone, namely Britain, that policies for them will not be set by central bankers in Frankfurt. Those plans are separate, though, and would need agreement of the European Parliament and a majority of European Union member states before becoming law. | The proposals would also modify the powers of another agency, the European Banking Authority, which is needed in part to assure countries outside the euro zone, namely Britain, that policies for them will not be set by central bankers in Frankfurt. Those plans are separate, though, and would need agreement of the European Parliament and a majority of European Union member states before becoming law. |
| By beefing up supervision under the European Central Bank, one of the few European institutions to emerge from the euro crisis with its reputation intact, officials in Brussels are seeking to end the vicious cycle in which some nations have racked up enormous debts by bailing out their banks. | By beefing up supervision under the European Central Bank, one of the few European institutions to emerge from the euro crisis with its reputation intact, officials in Brussels are seeking to end the vicious cycle in which some nations have racked up enormous debts by bailing out their banks. |
| France, for one, has been particularly wary of using public money to bail out banks at the expense of its other public objectives. That is why the French finance minister, Pierre Moscovici, has sought to maintain momentum for the new European banking proposal. | France, for one, has been particularly wary of using public money to bail out banks at the expense of its other public objectives. That is why the French finance minister, Pierre Moscovici, has sought to maintain momentum for the new European banking proposal. |
| “When I say as soon as possible, I mean in 2012,” Mr. Moscovici said in a speech at Bruegel, a research organization in Brussels, last week, referring to the establishment of a single supervisor and urging adoption this year of rules to guarantee deposits and close failing banks. | |
| But the timetable proposed by the commission and Mr. Moscovici was “ambitious” and even “radical,” said a senior European Union official who would speak only on condition of anonymity. | But the timetable proposed by the commission and Mr. Moscovici was “ambitious” and even “radical,” said a senior European Union official who would speak only on condition of anonymity. |
Jack Ewing contributed reporting from Frankfurt and Melissa Eddy from Berlin. | Jack Ewing contributed reporting from Frankfurt and Melissa Eddy from Berlin. |