Monday

21st Jun 2021

Germany denies stalling on banking union

  • A treaty change would slow down an already slow process (Photo: lincolnblues)

The German government Wednesday (17 April) denied it is stalling on the eurozone's "banking union," but says the plans would require an EU treaty change which could take years.

"We are not suddenly asking for a change in the EU treaty and I categorically reject the assertion that we are putting the brakes on the banking union," German finance ministry spokesman Martin Kotthaus said during a press conference in Berlin.

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He listed "important steps" already made by the EU in the past year on setting up a joint supervisor for the eurozone's largest banks within the European Central Bank.

He added that Germany is being "very constructive" when it comes to drafting joint rules on how to wind down failings banks or on harmonised deposit guarantees.

But Kotthaus insisted there needs to be "solid base in the EU treaties" for new institutions such as a planned "resolution authority" having the power and money to cover for bankrupt banks

He also said the solid base would be needed for a eurozone-wide deposit guarantee scheme.

The two concepts imply German banks or the German state would be partly liable for failing banks in other euro-states.

"This is nothing new, finance ministers in Dublin all agreed that for such a far-reaching step there needs to be a treaty change. But this has nothing to do with us being constructive and dynamic on joint supervision and the other steps of banking union," Kotthaus said.

In Brussels, Germany's insistence on treaty change - a de facto veto as treaty negotiations usually take years - is widely seen as being linked to the German elections in September.

"According to the EU council legal service, a banking resolution authority can be done without treaty change," one EU source told this website.

"But Germany doesn't like it and wants to kick it in the long grass. Any progress will remain on freeze until September," the source added.

For its part, the International Monetary Fund on Tuesday urged the EU to complete the banking union as swiftly as possible, warning that Europe is falling behind the US, with sluggish growth in Germany and recession in most other European countries.

The German stance does not come as a surprise, however.

"Germans have been mentioning the treaty issue a few times over the last years. It's not that they're stepping on the brakes, but they're afraid of elections and their Constitutional Court," Carsten Brzeski, the chief economist of ING Bank told EUobserver.

He pointed out that Berlin "doesn't even have to slow down the process," as the EU machinery is slow enough on its own and such ideas take at least three years to be put into practice.

Even if a banking resolution authority were to be in place tomorrow, it would not reduce the fiscal and economic problems in Spain, Italy or France, he added.

"The destiny of the eurozone is not in the hands of Berlin, but of the southern countries. Over the next few months, it will matter if unemployment continues to rise or stabilises, if there will be southern unrest, if they will start withdrawing from the reforms agenda," Brzeski said.

Germany softens stance on EU treaty change

The eurozone banking union is "urgent" and should be created within the current EU treaties, German finance minister Schaeuble has said, in a U-turn on previous comments.

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