As European leaders finish a two day summit today, the first bricks in a new banking union are beginning to fall into place.
The summit has so-far established that the European Central Bank will act as a new banking supervisor that will in turn allow failing banks to receive funding directly through the European Stability Mechanism (ESM).
But for EU countries without the euro, the new banking union could be the first step to becoming increasingly sidelined in a 'two-speed' Europe in which Denmark and the other nine non-euro countries will face an unfair disadvantage and lack of influence over key economic decisions.
The problem is that non-euro countries are not able to exert any influence over the new banking union, an issue that was addressed by PM Helle Thorning-Schmidt (Socialdemokraterne) in a joint editorial with Swedish PM Frederik Reinfeldt on Thursday in Politiken newspaper.
“There needs to be a better balance between the influence of euro and non-euro countries,” the PMs wrote.
The joint position taken by the two PMs ahead of the summit demonstrated both a recognition that Europe had split into two groups, euro and non-euro, but that these two factions should not drift too far apart.
They acknowledge the positive steps taken so far to tackle Europe’s debt crisis, such as the fiscal compact treaty and the creation of the rescue fund, the ESM.
Denmark joined the fiscal compact, which sets budgetary demands on members, despite not being a euro member in order to demonstrate a will for European unity in a time of crisis.
While Denmark held the presidency for the first six of this year, Thorning-Schmidt repeatedly stated that maintaining solidarity was vital for the future of Europe.
Thorning-Schmidt’s statement on Wednesday to her old university in Bruges that Europe needed to face the fact that it had become a two-speed union was then a statement that was more pragmatic than political.
“We need to come to terms with the fact that the EU is based on flexible integration,” Thorning-Schmidt said. “What is important now is that the banking union remains open to us and other non-euro countries to join if we want.”
The EU would benefit from having as many countries sign up to the banking union as possible. And Denmark's economy ministry, Margrethe Vestager (Radikale), has said Denmark is prepared to join the union if it improves the international standing of Danish banks.
Finding a way to allow Denmark to join the banking union, while also allowing Denmark control within the union, will prove tricky however.
“It is complicated to include non-Eurozone states like Denmark in a full way,” an anonymous EU official told Reuters. “We have to find some kind of creative way to make sure that non-euro member states are given the right role.”
One option is the creation of a new institution within the ECB where non-euro countries could exert their influence with regulators.
A disadvantage of joining the banking union would be the potential that members would end up bailing out each other’s failing banks.
In their joint editorial, the Danish and Swedish PMs argued that members of the banking union should’t pay the bill for recapitalising failing banks.
“It is not fair that taxpayers should pay for the errors of banks, especially banks in other countries,” they wrote. “We think the banks should pay.”
But while countries such as Sweden and Denmark attempt to make demands on the banking union, the French President, François Hollande, told the Guardian newspaper that it's their own faults that they stand without influence.
"Some countries did not want to join the euro. That's their decision," Hollande said. "But why should they then come and tell us how the eurozone should be controlled?"
