At the meeting of the ‘Economic and Financial Affairs’ Council on Tuesday 23 January, the finance ministers of the European Union discussed the completion of the banking union in the Eurozone, which further highlighted a clash between those in favour of reducing the risks and those in favour of sharing them.
These discussions follow the Eurozone summit of 15 December last year, at which the Nineteen said that the completion of Banking Union is the objective of the deepening of Economic and Monetary Union (EMU) that can most easily be achieved in the coming months.
In one corner, a group of states made up of Germany, the Netherlands and Belgium, amongst others, is calling for bank risks to be reduced first, before thinking about sharing them. Although Peter Altmaier, the German finance minister, acknowledged that progress had been made, he called for this progress to be clearly identified and quantified, in order to institute a European deposit insurance system (EDIS) at a later stage (see EUROPE 11881).
In the opposite corner, France, Spain and Italy welcome the progress made in the framework of risk reduction and are calling for progress to be made in setting the EDIS in place.
These member states received the backing of the European Central Bank (ECB). At the start of the debate, its Vice-President, Vítor Constâncio, clearly observed a reduction in risks (improvement of ratios of optimum-quality own funds, reduction in non-performing loan ratios) as a result of economic recovery, and called for risk-sharing to be encouraged.
The aim of the next discussions, therefore, will be to pin down what this risk reduction will look like and how it can be quantified. Pierre Moscovici, the European Commissioner for Economic and Financial Affairs, said that he was prepared to draw up a note on progress made.
Discussions of the Commission’s other proposals of 6 December 2017, on the deepening of Economic and Monetary Union (see EUROPE 11920), took up a lot less time.
What backstop for the Resolution Fund? The introduction of a backstop for the Single Resolution Fund, the financial arm of Banking Union, in the form of a line of credit of the European Stability Mechanism (ESM), has the support of the vast majority of member states.
Undoubtedly because there is still no stable German federal government in place, Altmaier declined to take a position on this point, although Germany opposed such a role for the ESM when the Single Resolution Fund was being set up.
There are also differences of opinion over the possibility of bringing the ESM into the Community fold. On this point, the ministers would rather focus on the content and action of a possible future European Monetary Fund (EMF) than debate the institutional plank.
On this point, the Bulgarian finance minister, Vladislav Goranov, whose country holds the rotating Presidency of the Council of the European Union until the end of June, said that this institutional matter raises questions that need to be discussed. “It would appear more appropriate to leave [this debate] to the Eurogroup and its preparatory bodies”, he added.
The discussions will continue at the Economic and Financial Committee (EFC), a working group of the Council, most notably ahead of the Eurozone summits scheduled to be held in March and June of this year. On this point, the ministers have agreed on the need to include the countries that are not currently part of the Eurozone in the discussions, rather than to discuss the reforms only between the ministers and representatives of the Eurozone countries. (Original version in French by Lucas Tripoteau)