Eurozone (Eurogroup) finance ministers failed to agree Thursday, June 17 on a timetable to complete the banking union with a common deposit insurance scheme, with Germany continuing to s ” oppose any progress unless member states address other issues, including banks’ exposure to sovereign debt.
Last December, eurozone leaders instructed their finance ministers to prepare “on a consensual basis, a phased and time-bound work plan on all outstanding elements needed to complete the banking union.”
The Eurogroup was to agree on the timetable on Thursday, in time for the next euro summit on June 25.
But German Finance Minister Olaf Scholz made it clear that the deal was not in sight as he entered the first Eurogroup in person in months.
“We are not ready for a deal today and this week,” he told reporters in Luxembourg, where the meeting took place.
A majority of Member States and a long list of institutions, including the European Commission, the European Central Bank, the European Parliament, the International Monetary Fund or the European Stability Mechanism, have been strong supporters of the completion of the banking union with a European Deposit Insurance Scheme (EDIS) to protect savers up to â¬ 100,000 in the euro zone.
The benefits of the banking union are “very, very strong,” ESM Managing Director Klaus Regling said after the Eurogroup closed on Thursday.
But Germany continues to be the main obstacle to creating the long-awaited common guarantee for depositors, despite the reduction in NPLs seen in the banking sector since the financial crisis.
Scholz said that “we are working very hard to make a breakthrough on the issue of the possible banking union”. But he added that he was sure that “it will still take a long time because there are a lot of questions” about what we need as a “holistic approach”.
Scholz referred to the proposal he made in November 2019 to unblock the discussion. In an opinion piece published by the Financial Times, he said he would consider EDIS if there was progress in other sensitive areas.
Among other proposals, he said member states should discuss ways to reduce banks’ exposure to sovereign debt, a complex issue that could trigger a systemic response in the financial sector if domestic bonds are no longer seen as debt. risk-free assets.
Discussions continued at the technical level, with in particular hybrid formulas for EDIS proposed as intermediate steps, but with few results.
Eurogroup President Paschal Donohoe said after the meeting on Thursday that “we have made progress, but we need to do more”.
All member states, he explained, remain committed to reaching an agreement on banking union, but “more imagination and effort” is needed to move forward on the four lines of work at the moment at the same time. in discussion.
These four areas are EDIS, regulatory treatment of sovereign exposures and financial stability, crisis management and enhanced cross-border integration.
Donohoe, who has made banking union one of his priorities as Eurogroup chairman, said he wanted to reach consensus on a “credible, ambitious and efficient” work plan.
A senior EU diplomat, however, underlined the difficulties of reaching an ambitious agreement before the German elections in September.
Donohoe explained that ministers will return to the issue by the end of the year. Once there is an agreement on the timetable, the Commission is expected to present a new proposal on EDIS and complete the banking union.
[Edited by Zoran Radosavljevic]