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Europe at Odds Over Next Steps to Banking Union

Associated Press
May 13, 2013

BERLIN (AP) -- European leaders are increasingly at odds over how to create a full-fledged banking union, the bloc's key project to stabilize its financial system and turn the tide in its stubborn debt crisis.

A majority of the 17 countries in the European Union's common euro currency union want to swiftly create a central banking regulator as well as an authority that can rescue or unwind ailing banks.

Berlin, however, says the EU should not rush. It argues that setting up such a rescue authority would require changing EU treaties -- a potentially cumbersome and time-consuming process.

"We should not make promises we cannot keep," Finance Minister Wolfgang Schaeuble wrote in Monday's Financial Times, proposing that Europe should at first rely on cooperation between national agencies.

That risks stirring impatience among others in Europe, who advocate moving as fast as possible in establishing the banking union to stabilize the 17-nation eurozone's financial system after more than three years of the debt crisis.

Schaeuble's counterpart in France, Spain, and Portugal called for quick progress in setting up the banking union.

"We don't have time to lose; the coming months will be very important," said Spanish Prime Minister Mariano Rajoy.

Europe's banking industry has been one of the main causes of the eurozone's financial crisis. Governments in countries such as Spain and Ireland had to step in to rescue their banks, which had been brought close to collapse by toxic property investments. These rescue attempts caused the governments' debt levels to increase to dangerously high levels.

Schaeuble wrote Monday that Germany will assess "with an open mind" a proposal to be presented next month by the European Commission, the EU's executive arm, for the creation of an authority to deal with failing banks. He warned that existing EU treaties "do not suffice to anchor beyond doubt a new and strong central resolu