Europe's planned banking union will not help countries with past banking problems, the Bundesbank's Andreas Dombret said today, dampening Ireland's hopes of tapping the euro zone rescue fund to help its banks.
Euro zone leaders said in June the ESM rescue fund would be able to recapitalise lenders directly once the new banking supervision under the roof of the European Central Bank was in place, which could aid Ireland's full return to debt markets.
But Dombret said the fund could only be used for future losses and damages, striking a similar tone to finance ministers from Germany, the Netherlands and Finland, when they last month laid out the terms under which they would allow the ESM to grant such assistance.
"No doubt, the banking union is an important building block for a more stable monetary union. But, as such, it is meant to mitigate future risks and not to cover past sins," Dombret said in the text of a speech to be given in Dublin.
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