FRANKFURT (MNI) – Permanent financial support structures for
countries must be avoided, even if the latest measures to aid
high-deficit countries in the Eurozone were appropriate, European
Central Bank Governing Council member Axel Weber said Thursday.
Weber again called for a toughening of the European Union’s
Stability and Growth Pact, saying the fiscal policy rule book needed to
be amended to increase the incentives for individual countries to have a
“solid” fiscal policy.
In a speech prepared for a banking convention here, Weber said that
under certain conditions a bank levy was “acceptable” and urged that
such mechanisms be adopted internationally as far as possible so as to
avoid competitive distortions.
“What must in any case be avoided is the introduction of permanent
support mechanisms” for countries, Weber pleaded. “Against this
background, the measures taken up in the framework of the current crisis
management were, however, defensible,” he argued.
“They should, however, not become the basis of a permanent
pre-financed support mechanism,” he underscored.
The most recent financial tension in the Eurozone exhibit some
parallels to the crisis on the financial markets and in the banking
system,” Weber ventured. In both cases, a credit-financed boom distorted
the allocation of resources.
The possibility of a bank going bust must be “accepted,” Weber
said. “What must be ensured, however, is that the collapse of a single
bank has no effect the system as a whole.”
“An expansion of the legal framework for cleaning up
system-relevant institutions threatened by insolvency is inevitable to
be able to cope with future systemic crises effectively” and in a timely
manner, Weber argued.
This is especially true for institutes that are active across
multiple borders, he added.
Weber reminded that protection against banking risks is already
included in the Basel II framework, with differentiated capital
requirements according to the risk level of various activities. In
contrast to a tax, banks retain the resources and thus strengthen their
Looking at the financing function, however, “the introduction of a
bank levy is on the contrary defensible,” Weber said.
“Certain criteria must, however, be filled,” he said. Income from
this tax cannot flow into the general public budget, but rather should
be put into a special fund to be used only for restructuring of
“Although the decisions about the use of income should remain in
national hands, an internationally harmonized bank levy is, as far as
possible, to be aimed for,” he pleaded.
It is not realistic to expect to see a comprehensive bank levy at
the level of the G20, Weber conceded. Still, the European Commission’s
proposal for creation of a “harmonized concept at the EU-level would
here be a right step,” he said.
–Frankfurt bureau; +49-69-720142; firstname.lastname@example.org