Sinn Féin - On Your Side

Banking Union stumbles at first hurdle as Commission green-lights Italian bailout - Carthy

1 June, 2017 - by Matt Carthy MEP


Sinn Fein MEP Matt Carthy has said a key element of the EU's Banking Union aimed at preventing taxpayer-funded bailouts of banks has failed in its first real test as the European Commission today gave the go-ahead to the Italian government to use public funds to rescue Monte dei Paschi di Siena (MPS).

Carthy, a member of the Economic and Monetary Affairs Committee, said: "The Banking Union was supposed to end the days of taxpayer-funded bailouts after the financial crisis - a laudable aspiration.

"But today we see definitive proof that the Banking Union has stumbled at the first hurdle. The new rules on bank recovery and resolution to prevent public funds from being used to bail out banks have failed as the 'precautionary recapitalisation' of the Italian bank Monte dei Paschi gets the green light from the Commission.

"Italy makes it clear for the world to see that taxpayer-funded bailouts can continue under these weak and loophole-ridden rules.

"Under the Bank Recovery and Resolution Directive, the Commission was legally required to carry out a review of whether there was a continuing need for the precautionary recapitalisation clause by December 2015, which it has failed to do. A year and a half past the deadline we are still waiting, and I have written to the Commission to question when the promised review will take place."

Carthy continued: "Equally worrying are the signs that the EU institutions intend to use this same loophole to pump public funds into banks to reduce their levels of non-performing loans (NPLs). This idea has been raised by the European Banking Authority and the European Central Bank in recent months, most recently by head of the EBA Andrea Enria in an appearance before the ECON committee last week.

“The Irish state has the fifth-highest level of NPLs in the EU, about four times higher than the EU average. Many Irish NPLs are found in the household and SME sectors, a trend worsened by austerity measures and failed policies in housing.

“Austerity policies enforced by the Troika in the so-called memorandum countries, and across the eurozone through the fiscal compact, are a major contributing factor to the high level of NPLs. The medium-term solution to the problem is an end to austerity policies across Europe and substantial infrastructure investment programmes that invest new funds into the real economy.

“It is not the role of the European institutions nor of taxpayers in the EU to ensure the profitability of the banking sector.”

Connect with Sinn Féin