Good Idea from Europe

ECB wants executioner to terminate Europe’s weak banks | Reuters.

Even a broken clock is right twice a day. The EU has leaked a plan to allow the EU antitrust chief to be responsible for killing zombie banks.

Currently, many European banks exist only because of cheap loans from the ECB. For political reasons, the “independent” ECB cannot withdraw funding and shutter these banks on its own. Each country has a vote on the ECB council and is trying to protect its turf. Spain probably has only a few solvent banks left in the entire country meaning dozens of banks would need to be wound down.

The new plan is to pass legislation to grant the antitrust chief resolution powers so that it could identify and resolve zombie banks. Cleaning up the financial system is one step to returning the Eurozone to growth.

We will have to wait and see how this debate play out over the coming months.

 

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