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Lawsuit in Germany challenges EU's 'banking union'

28 July 2014, 13:57 CET
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(KARLSRUHE) - Economists in Germany have mounted a legal challenge aimed at derailing a new set of EU financial sector rules known as the banking union, a federal court said Monday.

Germany's highest tribunal, the Federal Constitutional Court, received a complaint on Friday arguing that the EU's new bank regulatory system violates the country's Basic Law, the foundation of the legal system.

Partly in response to the eurozone's sovereign debt crisis, the European Union agreed earlier this year to set up a new "banking union".

From November, the new rules will give the European Central Bank direct supervision of the largest banks in the bloc, leaving the rest to each member nation's authorities.

"The plaintiffs see the banking union as unconstitutional because European treaties do not allow the complete transfer of national oversight duties to the ECB," a court spokesman told AFP.

"The plaintiffs say that it (the ECB) would have too much power over national banks."

The spokesman said the court would now review the complaint but could not say when it might render a decision.

The lead plaintiff, Berlin-based economist and former finance ministry official Markus Kerber, said that the new framework creates "unacceptable risks for those countries like Germany with a functioning banking supervision system".

"Countries like Germany with (its) cooperative and saving banks sector will share the risks of banking mismanagement in France and southern Europe," he said in a statement, warning of a "trap of a far-reaching mutualisation of liability".

The German government approved legislation in early July to put several national components of the banking union on the books. These measures must still pass parliament.

The finance ministry has said that it has thoroughly reviewed the new rules and found them to be compliant with the Basic Law.

The judges of the Federal Constitutional Court have already heard several cases related to EU crisis-fighting measures to save the euro.

With each ruling, they gave their blessing while imposing certain conditions such as giving the German parliament more powers to review key decisions.


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