Friday 14 May 2021
Home ECB Germany now wants to talk about banking union and deposit guarantee

Germany now wants to talk about banking union and deposit guarantee

Germany is nevertheless willing to continue to negotiate with the EU countries about establishing a European banking union and establishing a European deposit guarantee scheme. This is an important German concession, because the Germans previously blocked such a broad guarantee for savings. Berlin is hesitant that financially strong countries should help weak countries sooner and more often.

The German Finance Minister Olaf Scholz set out that proposal in a letter to the Financial Times business newspaper. The minister emphasizes that it is "no 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 euro countries.

The German plan comes down to a kind of flattened variant of an earlier proposal from the European Commission in 2017. That plan could not be worked out at the time because there was resistance from German banks. Also in the Netherlands, iedereen did not see those plans.

The Germans still set many conditions, but more effective (more or less mandatory) cooperation between banks in the EU countries has been a wish of many EU administrators for years. The approach that the strongest shoulders must bear the heaviest burden is indeed mouthed by many politicians, but still financially healthy countries are reluctant to pay the bulk of the bill.

In the first place, according to Scholz, there must be common rules for cases where banks run into problems. For example, Scholz believes that problems at a bank should first be dealt with by the existing, national deposit guarantee scheme in the country in question. The European guarantee scheme should only be used if that is not sufficient.

Large banks from the Federal Republic of Germany are responding positively this time. "The timing of the initiative was chosen wisely," said Commerzbank boss Martin Zielke. According to him, it is thanks to the upcoming President of the European Commission, the German Ursula von der Leyen, that the debate has started and lines are being set.

The Dutch minister Wopke Hoekstra (Finance) is delighted with Germany's willingness to set up a European deposit guarantee scheme. The establishment of the system has been on the table since the end of 2015, but until now it has mainly been blocked by Germany. Berlin is afraid to have to pay for failing bank policies in other countries, and in particular refers to the previous crisis in Greece.

For Germany, but also for the Netherlands, it is important that the banks first clean up their own balance sheets and reduce the risk of 'bad loans' by their own governments. The Netherlands has been insisting for some time not to consider government bonds as risk-free investments. For countries such as Italy, where many banks purchase government bonds of their own, the issue is very sensitive.

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