EU bank reform in spot as Germany and France wrangle

While France is in the favor of a prompt action on a plan that has been specifically designed for tackling the crisis, Germany is said to be dragging its feet on the proposal to centralize banking supervision in the European Union, a group of 27 member nations.

The proposal, when implemented, will reduce the interdependence of national governments and their banks, which is being speculated as the major cause of Euro Zone's troubles. The pan-Euro bank, the ECB, will have powers to police banks across the European Union and will be able to break the vicious cycle after the proposal goes through.

EU Finance Ministers met on Saturday in Cyprus for discussing the said proposal. Differences were said to crop-up after experts provided specific details.

Germany, the biggest economy of the region, is skeptical on whether the ECB should get the powers to monitor over 6000 banks in the entire Euro-region. In addition, it raised question on the ability of the central bank to supervise all of them.

German Finance Minister Wolfgang Schaeuble cautioned, "My concern is always that you run the danger of creating expectations, also among financial market participants, that you then cannot fulfil. I don't see that there can be direct recapitalisation through the European Stability Mechanism already by January 1."

France, on the other hand, has a completely different viewpoint. Its banks have a higher exposure to troubled economies like Greece and growth has more or less stalled in the country. It is thus hell-bent on pushing through the reform.

French Finance Minister Pierre Moscovici is not impressed by Schaeuble's stand. He said, "We can, and we have to, go fast. We must not waste time in resolving the euro zone crisis. The euro crisis is affecting everyone in the euro zone, including Germany. It is not a question of rushing but we must keep up the rhythm of reform."