Sven Giegold

Reuters: EXCLUSIVE-Lawmakers’ challenge could derail EU bank watchdogs

Veto over new authorities had been key to clinch deal
Senior lawmaker says veto is get-out-of-jail-free card
EU Parliament’s challenge expected within weeks

By John O’Donnell

BRUSSELS, Feb 1 (Reuters) – European Union parliamentarians are threatening to spoil plans to set up powerful banking watchdogs by challenging a deal hatched between British Chancellor Alistair Darling and other finance ministers.

Last December, Darling agreed to let the EU establish new authorities to police financial services in the 27-nation bloc but only on the condition that countries could veto those bodies’ decisions if they would cost public money.

Now senior lawmakers are preparing to challenge the deal — brokered after difficult talks among Darling, German Finance Minister Wolfgang Schaeuble, France’s Christine Lagarde and others — as they fear it could render the watchdogs powerless.

The four lawmakers who will write the European Parliament’s version of the rules are due to meet soon to finalise their position and will include a demand that EU countries ditch the veto, a central pillar of December’s agreement, as it stands.

“The veto on fiscal grounds is basically a get-out-of-jail-free card for any country that disagrees with anything the new watchdogs say,” said Sven Giegold, one of the four parliamentarians.

“In parliament, I think most people are unhappy about the wording of this clause. We want strong supervisors that have the powers to do their job. This veto — at least as the countries have defined it — has to go,” the German Green told Reuters.

Parliament has an equal say alongside EU countries in shaping laws and the sides always negotiate draft rules. The bloc’s governments now need its backing to establish the authorities to police banks.

Giegold’s concerns were echoed by another of the four influential parliamentarians, Peter Skinner.

“They need to tell us what (the veto) means and can’t leave us hanging in the air,” said Skinner, a member of Britain’s ruling Labour Party.

“We have to really understand how that might be used … in order to be able to give our support. We are not here to rubber-stamp.”

It was unclear what the outcome of talks between the governments and parliamentarians would be or whether parliament would stop the EU plans if a compromise failed to be reached.

But Udo Bullmann, who is coordinating the response of the parliament’s Socialists — its second-largest political group — said unease was widespread.

“The parliamentarians are unhappy in general with the agreement reached by the countries,” he said. “They are worried that the new authorities will be rendered powerless.

“In particular they see this danger in the right of countries to veto a decision. Parliament will be taking a very critical look at this agreement and will want changes.”

The deal among finance ministers to create what one expert dubbed federal authorities as soon as this year is supposed to tighten how lenders are policed in Europe and prevent a repeat of the global financial crisis.

On banks, it will establish a London-based body as the ultimate EU arbiter in tackling cross-border crises with powers to overrule a national watchdog such as Britain’s Financial Services Authority.

There will also be a Frankfurt-based agency to monitor bigger systemic risks to the economy.

Despite widespread consensus that supervisors failed to spot the problems that led to the worst economic collapse in a generation, setting up pan-EU watchdogs has proved controversial.

France had been in favour of giving the new bodies more clout, while Britain, fearing that it would lose influence over London’s financial centre, wanted their powers watered down.

In December, they struck a compromise deal which has now been turned over to parliament for approval.

(C) Reuters 2010.

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