Asmussen: ESM to Backstop Resolution Fund Would Need Change of ESM Treaty

    By Todd Buell and Hans Bentzien

    FRANKFURT--The euro zone's bailout fund can temporarily backstop its resolution fund, but only after the treaty governing the bailout fund is changed, European Central Bank Executive Board member Joerg Asmussen said Wednesday.

    European authorities are currently working out how to finance a proposed resolution fund that could help wind down ailing banks. While the fund would be financed by a levy on banks, this could take up to a decade to finance fully. Therefore, the fund could borrow from the euro zone's permanent bailout fund, the ESM. Since this would be in the form of loans it would be "fiscally neutral" and "not a transfer union via the back door," said Mr. Asmussen.

    "This construction is, however, not possible via the existing ESM treaty," he said. "One would need to change the ESM treaty for that." He said, however, that this had no bearing on the European Union's treaties, clarifying a point that had caused some confusion in recent days. The difference is that while all 28 member states must ratify changes to the EU treaty, to change the ESM treaty requires only the unanimous consent of euro-zone members. The euro zone currently has 17 members, though this is due to rise to 18 at the beginning of next year.

    Mr. Asmussen also praised the U.S. for its efforts to rebuild its banking system after the fall of Lehman Brothers, saying that its bank stress tests were more credible and that the country acted in a clearer way with both non-performing bank loans and banks that aren't viable than has been the case in Europe.

    Write to Todd Buell at; Twitter @ToddBuell