Historical Archives of the European Union

Banking Union, European law and supranational integration

In this interview, Pedro Teixeira, Director General at ECB Banking Supervision and EUI alumnus, tells us about his recent book on the legal history of the European banking union and discusses the implications of the book’s findings for the future of European integration.

04/05/2021 | News

In the next De Gasperi seminar on Thursday 27 May, Pedro Gustavo Teixeira, Director General at the European Central Bank Banking Supervision and EUI alumnus, will present and discuss together with Emmanuel Mourlon-Druol, Professor of International Economic History at the University of Glasgow, his recently published book on the legal history of the European Banking Union.

In the below interview, Pedro Gustavo Teixeira presents his research and discusses the implications of the book’s findings for the future of European integration.

How did you come up with this research topic?

"The book reflects my long-standing academic and professional interests: understanding how European law shapes financial and monetary integration. I was privileged to start my career at the European Central Bank almost from its inception and work with Tommaso Padoa-Schioppa, who was the strongest advocate of a banking union to complement the monetary union. This was a very difficult debate at the time as Member States were quite protective of their sovereignty over the banking sector.

Paraphrasing one of the quotes of Padoa-Schioppa about EMU, it was 'certainly possible but rather unlikely' that a banking union would ever come about, yet it happened, and rather quickly, a little more than a decade after the introduction of the euro.

This is my starting point. Was the banking union just an accident of history, due to a succession of unpredictable and once-in-a-generation crises? Or was it—more than possible—‘probable’ due to the logic of integration hardwired into European law? In order to give an answer, I reconstruct the various legal and institutional threads in the evolution of the European financial market which lead to the banking union. Although the narrative is focused on the inner workings of law, I hope to have contributed, albeit timidly, to the growing literature on the historiography of European law."

What can we learn from the legal history and creation of the European banking union for the future of European integration?

"The construction of the banking union corresponds to a perfect model of supranational integration, at least as far as feasible under the Treaty: the centralisation of executive competences in European institutions, the unification of a system of European law, the jurisdiction of the European Court of Justice, and the accountability to the European Parliament and the EU Council. The question is whether this model of ‘common rules and common institutions’ is the endpoint of all streams of European integration, as envisaged by Monnet.

My finding is that, despite the many approaches over decades to create through European law an integrated market, the logic remained throughout the same as first outlined in the Spaak Report of 1956: the supranational logic. What was missing though was the development of a stabilisation function at European level to cope with the consequences of integration. This was an omission by design. The core concept of the Spaak Report was that a common market would emerge through the supranational enforcement of the economic freedoms. There would be no transfer of any fiscal, economic or social policies. Even if this meant that integration would always remain incomplete. That was the political and ideological compromise at the heart of the negotiations for the Treaty of Rome. To put it simply, Member States agreed to share the benefits of integration but never its risks. The pragmatism of Spaak won over the idealism of Monnet.

The implications for wider European integration are then clear. When a shock occurs and common risks materialise, like the financial and sovereign debt crises, integration is bound to fail unless some risk-sharing emerges at the European level, hence leading to more supranational integration and so on. This happened with the banking union. The current pandemic crisis points in the same direction with the Next Generation EU. European stabilisation functions, such as fiscal powers, require in turn some form of political integration to make them democratically legitimate, otherwise they will not be permanent. I think that all the challenges we face imply that there is an urgent need for more clarity and commitment on this supranational path, rather than continuing to wait and see what happens in each crisis. The Conference on the Future of Europe will hopefully provide an opportunity for that."

Your ambitious book looks at the start of a European Financial Market from the 1970s up to nowadays. Where did you collect the various relevant sources to conduct such research?

"Most of my primary sources were what many perceive as bureaucratic and somewhat obscure official documents from European institutions, global bodies and national authorities. It certainly reinforces the bias of those arguing that European integration is a technocratic project …

What I attempt in the book, though, is to unveil the ideas and the logic behind such technical discourse, how they shaped the evolution of European law, and the implications for integration. For this purpose, I found a treasure trove in the HAEU of the successive drafts of reports and legislation, annotations, correspondence, and personal diaries of former European officials. It was stimulating to listen and read through the transcripts of them being interviewed. They shed light on what was going on at the time: their conversations, what they were aiming at with a certain paper or another, the key importance of a compromise on a word or a sentence now lost in time, and what happened through serendipity instead of by design, often dismissing the claims of elaborate theories of integration. Even trivia, like the fact with which I start the book that the Spaak Report was drafted in a grand hotel of the South of France, provide meaning to research. Being myself a Eurocrat, I could recognise dynamics and dilemmas of the past, which have been replayed over and over again in European negotiations. The HAEU makes it rewarding to connect all these dots.

Let me add that I benefitted as well from the emerging research drawing on the biographies of European officials, judges, scholars, including the oral history projects among others by the HAEU or the Max Planck Institute for European Legal History. I would have wanted to put more emphasis in my narrative on the biographies of the most influential players and how they relate to the legal thinking pushing forward integration. In other words, to have explored the intersections of historical context, personal stories, worldviews, which also define European law. This would have meant though re-writing a different book, so I have to leave it to next time."

Register to participate in the upcoming De Gasperi Seminar, on Thursday 27 May, 15:00-16:30, on Zoom.

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