Dutch say unclear if ESM bank aid will require treaty change

Reuters News
Posted: Jul 03, 2012 8:49 AM
Dutch say unclear if ESM bank aid will require treaty change

AMSTERDAM (Reuters) - The Netherlands, a hardline critic of European bailouts, said on Tuesday it was uncertain if a direct recapitalization of banks by the euro zone's permanent rescue fund would require a treaty change.

The Dutch government's statement signaled a potential conflict with the European Commission, which said on Monday that no legislative changes would be needed to the treaty governing the European Stability Mechanism (ESM) to allow the rescue fund to lend directly to banks.

Euro zone leaders agreed last week to allow the ESM to lend directly to banks rather than via national governments.

Dutch Finance Minister Jan Kees de Jager said in the Dutch Senate that his cabinet had initially assumed any treaty changes to allow the ESM to recapitalize banks would have to be ratified by national parliaments. That may not be the case, he said, but it was still unclear whether ratification would be needed or whether euro zone finance ministers on the ESM's board, or council of governors, would be able to approve the changes.

"We had originally heard legal voices out of Brussels that a direct bank recapitalization, as we had envisioned it, required a treaty change," De Jager said.

"In the past week, people have indicated that possibly there are options to choose for such an interpretation that ratification of a treaty change is not needed but can be dealt with by a unanimous decision of the council of governors."

Before the debate, the Dutch government said in a letter to parliament that it assumed that no treaty change would be needed and, when appropriate, the cabinet would propose that parliament approve the addition to the ESM's mandate.

Even if no new ratification was needed, the government would still consult parliament on any recapitalization requests made, De Jager said.

On Monday, Finland cast doubt on another aspect of last week's euro zone deal, saying it would block the rescue fund from buying government bonds in the open market - an idea the Netherlands also indicated it opposed.

The Netherlands has berated southern European countries for breaking budget rules and has consistently stressed the need for fiscal discipline.

As expected, the Dutch Senate approved the establishment of the ESM with a two-thirds majority on Tuesday, after the Lower House approved it last month.

(Reporting by Gilbert Kreijger; Editing by John Stonestreet and Anthony Deutsch)