Cheers have been raised for the new Eurozone banking regulation authority which was apparently agreed at the latest eurozone meeting in the early hours of this morning. I'm not so sure.
Certain questions have to be answered: who will grant banking licenses, the authority or national bodies? Common sense says that if you have a supranational regulator then that must be the body that issues banking licenses, but this is Europe we are talking about, and common sense plays no part here. Also, will regulations (and licences!) be Europe wide, or merely country wide as at present (albeit set by an international body)? There would always be cases where policies set Europe wide that suited the majority of countries wouldn't suit a minority, and if the new regulator's regulations meant that Italian banks couldn't stuff themselves with junk Italian sovereign debt when the Italian prime minister wanted them to, then I suspect underhand means might end up being employed.
My biggest worry is that the solvent northern countries may simply have painted themselves into a very sticky corner. Germany may think that it will be able to control the new authority, as the biggest creditor nation, but I don't think that any such control can last. Prepare for a new-found commitment to democratic accountability on the part of Italy, Greece, Portugal and France. The northern countries will find that while their financial reserves have become beholden to the new regulator, the new regulator will end up being dominated by the spendthrifts in the south.
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