- Plans to create a eurozone banking union hit a brick wall on Tuesday
- Germany's finance minister cautioned over its quick creation
- Establishing a eurozone banking supervisor is considered critical
- Ministers from other EU countries warned of the dangers of delaying
Plans to create a eurozone banking union hit a brick wall on Tuesday after Germany's influential finance minister cautioned over moving too quickly, casting doubts over whether the EU would seal a deal by the end of the year.
The objections from Wolfgang Schäuble come just a week before a summit of EU leaders and raise the prospect of a significant delay to establishing a single eurozone banking supervisor, a reform billed as critical to rebuilding confidence in the bloc's shaky financial sector.
Some of Mr Schäuble's counterparts at a gathering in Brussels warned that markets could be spooked by any sign that the EU was backing away from consolidating banking oversight, just five months after agreeing to pursue it.
Vítor Constâncio, the vice-president of the European Central Bank, said the promise to deliver banking supervision reforms "quickly" was an "important element for credibility for the euro area".
"I want to stress that if that would not happen that would be bad in terms of market reactions," he said.
Mr Schäuble voiced longstanding concerns but in stronger terms. He is refusing to allow the ECB to take over supervisory responsibility of all 6,000 eurozone banks -- including small banks such as Germany's plethora of regional savings banks -- and wants a clean separation between the ECB's monetary policy and bank supervision.
"It would be very difficult to get an approval from German parliament if you would leave the supervision for all the German banks," Mr Schäuble told his fellow ministers. "Nobody believes that any European institution would be capable of supervising 6,000 banks in Europe -- maybe not in this decade, to be very frank."
He suggested that creating a sufficient firewall within the ECB to separate its banking and monetary role would require a change in EU treaties -- a step that could cause years of delay. Sweden and Poland share his concerns about existing ECB rules, which prevent non-eurozone banking union members enjoying full voting rights.
Mr Schäuble's strident stance unsettled diplomats who had been cautiously optimistic about a deal. But his calls for "creative" solutions to legal issues gave some hope that a compromise was possible when finance ministers meet again on the eve of next Wednesday's summit.
Senior EU officials believe Angela Merkel, German chancellor, is more open to a deal.
In thinly veiled warnings to Berlin, ministers from France, Belgium, Spain and Italy pointed to dangers of missing the EU deadline.
Pierre Moscovici, France's finance minister, said: "We should not dally."
Steven Vanackere, the Belgian finance minister, added: "It is a strange contradiction to say quality before everything ... Look at how the world is looking at us. Tempo is part of quality."
Britain is also threatening to block the deal without safeguards to check the dominance of the ECB in setting technical standards for all EU countries. It is demanding a "double majority" voting system at the European Banking Authority, requiring assent from those inside and outside the banking union.
While London has support from non-eurozone countries, France and Germany strongly opposed its demands, setting the stage for a highly-charged political fight. Mr Moscovici said the changes would hamper decision making and "considerably weaken supervision in Europe".