Should the European Union, under circumstances, be able to force member states to provide financial aid to banks that are at risk of bankruptcy? Or is this too big a violation of a nation’s sovereignty?

These were the stakes at a recent EU summit in Brussels, where cross-border financial regulation was the topic of discussion.

Warn and act
The proposal was to set up a European System of Financial Supervisors that monitors banking, insurance and securities involving two or more member states – in cooperation with national governments.

This new entity would act only if the involved member states are unable to sort things out themselves. Additionally, an European Systemic Risk Council chaired by the president of the European Central Bank would be set up to warn for a pending crisis and recommend a course of action.

United Kingdom
The initial proposal was declined after opposition by the United Kingdom. UK representatives expressed fear of infringement on their national autonomy when an EU council dictates government support. Additionally, they feared that increased supervision would decrease competitiveness. The underlying idea is that easing up the regulations will make banks more prone to settle in the UK.

In response, the EU toned down the initial proposal and agreed that a member state’s control over their own budget remains intact. By the end of the year the proposal should materialize into a new bills.

What is your opinion? Is European control over government support necessary to control the crisis and prevent a new crisis in the future? Or do you find, along with the Brits, that the proposal is just too big an infringement on national governance? We look forward to hearing your reasons.