Germany is now willing to continue negotiations with EU countries on establishing a European banking union and implementing a European deposit guarantee scheme. This is an important concession from Germany, as the Germans had previously blocked such broad guarantees for savings. Berlin is wary that financially strong countries would have to help weaker countries sooner and more often.
German Finance Minister Olaf Scholz outlined this proposal in an opinion letter in the business newspaper Financial Times. The minister emphasized that it is "not a small step" for a German to be open to a European savings guarantee. He will undoubtedly also discuss the proposal today with the finance ministers of the eurozone countries.
The German plan essentially amounts to a somewhat softened version of an earlier proposal by the European Commission from 2017. At that time, the plan could not be further developed due to resistance from German banks. Not everyone in the Netherlands was also enthusiastic about those plans.
However, the Germans still impose many conditions, but more effective (more or less mandatory) cooperation among banks in EU countries has been a longstanding wish of many EU officials. The approach that the strongest shoulders should bear the heaviest burdens is indeed often expressed verbally by many politicians, but financially sound countries remain hesitant to pay the largest part of the bill.
First of all, Scholz believes common rules must be established for cases where banks run into trouble. For instance, Scholz thinks that problems at a bank should first be dealt with by the existing national deposit guarantee system in the respective country. Only if that is insufficient should the European guarantee scheme be applied.
Major banks from the Federal Republic are responding positively this time. "The timing of the initiative is well chosen," said Commerzbank CEO Martin Zielke. According to him, it is thanks to the incoming European Commission President, the German Ursula von der Leyen, that the debate has revived and new directions are being set.
Dutch Finance Minister Wopke Hoekstra is delighted with Germany’s willingness to establish a European deposit guarantee scheme. The creation of the scheme has been on the table since the end of 2015 but has so far been mainly blocked by Germany. Berlin fears having to foot the bill for failing banking policies in other countries, particularly referring to the previous crisis in Greece.
For Germany, but also for the Netherlands, it is important that banks first clean up their own balance sheets and reduce risks of 'bad loans' through their own governments. The Netherlands has long emphasized that government bonds should not be regarded as risk-free investments. For countries like Italy, where many banks buy government bonds from their own government, this issue is very sensitive.