Luxembourg/Brussels, 14/09/2015 (Agence Europe) - The majority of European financial ministers are in favour of draft legislation on the deposit guarantee arm of banking Union in the eurozone, despite opposition from Germany.
Luxembourg's finance minister, Pierre Gramegna, said on Saturday 12 September after an Ecofin Council meeting on the strengthening of economic and monetary union (EMU) that it was possible to have greater pooling of risk if alongside that, there was a reduction in the risks burdening the system. He said that deepening Banking Union and setting up a Capital Market Union (CMU) would make it possible to achieve this two-pronged objective.
Based on a report by the five presidents, the European Commission wants to draw up draft legislation to set up a European deposit (savings) guarantee system (see EUROPE 11348). Euro Commissioner Valdis Dombrovskis said the Commission was proposing a two-stage approach, starting with a reassurance system for national savings deposits schemes that would then be turned into a truly pan-European system.
One way of achieving the first stage might be to make lending compulsory among nation schemes. The current directive makes such lending voluntary.
Dombrovskis did not say that the European Commission would unveil draft legislation on national deposit guarantee systems at the same time as proposals to boost EMU in the short-term that he said would be published in mid-October. Within the financial services department at the Commission, the target set for drawing up draft legislation in this connection is the end of 2015.
Applying what has been decided upon. Several member states are reluctant about the idea of completion of Banking Union (see EUROPE 11359), saying that it makes better sense to focus on implementing legislation that has already been decided upon, like the BRRD directive on member states' bank restructuring and resolution rules. The directive came into force in January 2015, but has not yet been transposed throughout the EU (see EUROPE 11369).
German finance minister Wolfgang Schäuble says that it is not acceptable to only make progress on risk pooling. Germany says that an end must be put to the way bank crises generate sovereign debt crises and highlights the contribution to be made by shareholders and private lenders. The Czech Republic, Slovenia and Denmark share this approach.
Gramegna is optimistic, feeling that Germany's position is mostly a problem of timing, wanting to know when pooling of risk would take place. He points out that the door hasn't been closed and it's a question of sequencing. Dealing with risk and organising greater pooling of it are two sides of the same coin, said the head of Eurogroup, Jeroen Dijsselbloem.
When it comes to the boosting of EMU, the ministers back the two-stage approach. In the short-term, they are reported to want to launch initiatives that do not require any changes to the treaty. Alongside this, reflection on more ambitious economic, financial and political integration in the eurozone would be carried out so that practical steps can be taken post-2017. The debate on the boosting of EMU will encourage a more open debate with non-euro countries, admitted the ministers on Saturday. The United Kingdom wants a statement to be annexed to the treaty to the effect that greater integration of eurozone nations must not harm the integrity of the Single Market.
In the short-term, the ministers recommend surgery on the Stability and Growth Pact to rationalise the macroeconomic imbalance procedures. They say that power needs to be defined before setting up a network of national competitiveness authorities and a European budgetary committee. (Mathieu Bion)