If someone calls a political push "an important contribution," that's rarely a good sign. This is what happened to the new plan of Federal Finance Minister Olaf Scholz to set up an EU-wide deposit insurance of bank balances. The ambiguous praise came in this case from Eurogroup boss Mario Centeno, who did not forget to point out the "very sensitive" parts of the proposal.
Because they have it all in itself. Scholz formulated his ideas about the EU banking union in an eight-page position paper. It is particularly noteworthy that the SPD politician is giving up Germany's hitherto conglomerate position of not even talking about a European reinsurance system for bank balances before financial risks are reduced in other EU countries.
Now Scholz is making headway, but also connects his offer with the well-known German demands:
- a reduction of risks in the bank balance sheets, especially of loans at risk of default;
- uniform EU rules for bank bankruptcies, no matter how large the institutions are;
- the introduction of a minimum taxation of companies in order to prevent harmful competition among the EU Member States for the lowest tax rates;
- the valuation of government bonds in bank balance sheets according to their risk.
Scholz expects this to increase the resilience of the European banking system in times of crisis. If customers see their deposits as safe, so the calculus, they do not pull off their money in a crisis and bring the banks in even greater difficulties. The competitiveness of the EU vis-à-vis the USA and China should also increase.
Shared echo from the rest of the EU
On Thursday, however, German ideas met with a mixed response at a meeting of EU finance ministers in Brussels. From Austria and the Netherlands came praise for the demands for risk reduction, especially in southern European countries. However, Roberto Gualteri, Finance Minister of heavily indebted Italy, turned against the risk assessment of government bonds, not surprisingly.
In tax havens such as Malta, Luxembourg or Ireland, Scholz's ideas for introducing minimum business taxation are likely to cause little enthusiasm, as they could undermine the current business model of these countries.
Scholz's initiative, according to the Ministry of Finance, is meant as a first step, true to the motto: Germany has moved, now the others should also move. The problem: So far, Scholz has moved, but not Germany. Because the plan of the Minister of Finance, as much is now clear, was not coordinated with the rest of the Federal Government. And what will be left of his plan after this vote, no one knows.
Ministry of Finance expects agreement of the coalition
But why should politicians from other EU countries risk venturing into controversial issues if they do not even know whether Scholz's plan will survive the next few days and weeks? In Scholz 'Ministry of Finance you have only vague answers.
It is optimistic that the coalition partners of the Union accept the proposal, at least in large parts, it is said. And besides, you still have the whole November time. At the beginning of December, finance ministers want to discuss the further timetable for the completion of the Banking Union, said Eurogroup chief Centeno on the sidelines of the ministerial meeting in Brussels.
Ideally, as the Scholz camp hopes, the EU Commission will then receive a broad mandate to draw up a new banking union proposal based on the Scholz plan. He could then be ready for decision in mid-2020. Because of the banking union, which was decided by the EU in response to the financial crisis, so far only a stronger banking supervision and a winding-up mechanism for ailing credit institutions have been implemented.