EU’s 6 biggest economies back single finance watchdog

BRUSSELS — The EU’s six largest economies have thrown their weight behind plans to centralize oversight of some of Europe’s biggest financial companies under a single supervisor, according to a document obtained by POLITICO.

The finance ministers of France, Germany, Italy, the Netherlands, Poland and Spain — the so-called “E6” group — backed the idea in a six-page letter addressed to the European Commission, the Eurogroup and the Council of the European Union.

The letter outlined multiple initiatives and deadlines that Brussels should pursue this year. The goal is to create a deeper financial market to “strengthen Europe’s growth potential, enhance its economic sovereignty and provide a stronger foundation for financing common priorities,” the letter said.

Among the most contentious initiatives is introducing EU supervision of “the most systemic, relevant, cross-border financial market infrastructures” amid firm resistance from a group of small countries, led by Ireland and Luxembourg, which rely on their outsized finance sectors and are reluctant to cede control to the EU level.

EU leaders are set to discuss how best to speed up Brussels’ decade-long plans to create a U.S-style financial market next week after years of lackluster results amid vying national interests. Ireland has already sounded the alarm of the E6 group, as smaller countries fret that their views will be sidelined if countries club together to integrate their financial markets.

In the letter, the E6 ministers said creating a “savings and investments union … has become an urgent strategic necessity” and that they commit to “taking action at European as well as at national level.”

Other targets in the letter include reviving the bloc’s market for resold debt, or securitization, minting virtual euro banknotes, and introducing an EU-wide one-stop shop for founding companies, dubbed the 28th regime. There are also calls for greater transparency in stock markets and a push for a legislative package this year to streamline the EU’s financial rules.

Seeking a majority

The idea of a single market watchdog, which would play a role similar to the European Central Bank’s supervisory arm for banking, has long been blocked at EU level due to the opposition of small countries and the lack of Germany’s backing.

The support of the major economies is a breakthrough in the likelihood of agreeing to the plan, which the European Commission officially proposed in December but has been informally discussed since the financial crisis.

The E6 countries wouldn’t be able to do it alone. They would first have to seek a “qualified majority” across the bloc to pass the proposal. That threshold requires the support of 15 countries that represent at least 65 percent of the EU. Should that fail, nine countries can pursue “enhanced cooperation” together to achieve their aims.

The supervision plan would centralize oversight of large, cross-border financial plumbing firms, such as stock exchanges and clearinghouses, under the Paris-based European Securities and Markets Authority.

The six countries stop short of fully endorsing the Commission’s December proposal, instead saying it “provides a solid basis for further discussion and allows us to work out the best possible solutions in the coming weeks.”

The ministers call for EU countries to reach a political deal on the Commission’s plan by this summer.