“Euro-area finance ministers staked out their turf in a brewing battle over bank rescues amid German and Austrian warnings that direct bailouts won’t be widely available.
Ministers seek an agreement in the first half of this year on how and when the 500 billion-euro ($668 billion) European Stability Mechanism can bypass governments and provide direct help to banks. Ireland and France led calls at a meeting of euro finance chiefs in Brussels yesterday for work to proceed quickly so the new tool can be ready as quickly as possible.
Some creditor nations countered that direct bank aid shouldn’t start until the European Central Bank takes up its new role as single supervisor within the currency zone, which isn’t expected until 2014. In the meantime, the ESM needs to leave its resources free to be a lender of last resort, German Finance Minister Wolfgang Schaeuble said.
“One has to damp further-reaching expectations because that would completely overburden the ESM,” Schaeuble told reporters after the meeting. He urged the euro area not to “repeat earlier mistakes” by raising hopes of aid that won’t materialize.
“We mustn’t relapse to create incentives that fall under the heading of moral hazard,” Schaeuble said. “We must keep decision-making power and liability close together…”
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