Germany stops short of backing European Banking Union

EPA-EFE/OMER MESSINGER

German Minister of Finance of the Social Democratic Party (SPD) Olaf Scholz delivers a speech during a session at the German parliament 'Bundestag' in Berlin, November 20, 2018.

Germany stops short of backing European Banking Union


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German Finance Minister Olaf Scholz has said that he wants to see the Eurozone members approve a widening of the competence for the European Stability Mechanism (ESM) bailout fund by December 3 as a way for the ESM to lend to banks as well as sovereigns, which would later develop into a fully-fledged European Monetary Fund.

In a nod to French President Emmanuel Macron, he also said that he wanted to see the introduction of a Eurozone budget that would boost investment, economic convergence, competitiveness and stability.

Neither of these two measures, however, amounts to a European Deposit Insurance Scheme (EDIS) that would decouple the credibility of EU lenders from the sovereigns in which they are based, a key step in completing a fully-fledged banking union.

Germany resists the notion of a banking union before European banks get rid of a big pile of Non-Performing Loans (NPLs) in Italy, Greece, Spain, and Portugal.

Members of the European Central Bank board from France and these southern EU members believe that NPLs are now at a level that should not be considered an obstacle to completing the insurance scheme.

Its European deposit insurance scheme (EDIS) is meant to cover insured savers (up to €100,000) in case of a bank failure.

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