online.wsj.com/article/BT-CO-20130607-705217.html
Irish PM: Essential to Meet Deadlines on Banking Union
The euro zone's political leaders must stick to their timetable for building a banking union, or risk undermining still "fragile" confidence in the currency area's future, Irish Prime Minister Enda Kenny said Friday.
Speaking at a conference in Helsinki, Mr. Kenny said that while policy makers had removed many of the doubts about the euro zone's continued existence over the past 12 months, they still faced "significant challenges." He said there was therefore "no room for slacking off" on reforms efforts.
Mr. Kenny said a banking union is essential to the proper functioning of the euro zone and warned that any failure to meet the timetable for its establishment would weaken confidence in the currency area.
"Making it a reality is a credibility test of our capacity as leaders to deliver on our commitments," he said. "We promised to break the vicious circle between banks and sovereigns. We can't do that without a functioning banking union."
The first pillar of the banking union, a Single Supervisory Mechanism housed at the European Central Bank, is intended to start operations by mid 2014. The second pillar, a new mechanism and agency for resolving failed banks, is likely to start operations in 2015, although the ECB would prefer it to coincide with the start of the supervisory mechanism.
A key element of the agency's new powers would be the ability to "bail in" liabilities of failed banks that need to be resolved, and the European Commission is expected to present a new draft of legislation on bank resolution this month. Although many, including ECB President Mario Draghi, had argued for the new rules on bail-ins to be accelerated after Cyprus' largest banks came close to collapsing this year, the Commission is only expected to introduce them in 2018.
Mr. Kenny said the European Union hadn't been weakened by the fiscal and banking crisis that it has confronted in recent years.
"The EU is stronger because we have shown that we can work together to overcome some of the greatest difficulties we have faced," he said. "When the market wolf was at the door, the European family did pull together."
