Finance ministers welcomed a German initiative to unblock proposals for a common bank deposit guarantee scheme in the eurozone, but questioned Berlin’s request to ask additional capital buffers in return for banks holding sovereign debt.
“Today I sensed a fresh new impetus to develop other important avenues to further strengthen the euro,” Eurogroup president Mario Centeno told reporters after the Eurogroup meeting.
The contribution by German finance minister Olaf Scholz was welcomed by all, Centeno explained, admitting however that it is “still a difficult discussion”.
The Eurogroup meeting discussed proposals to unblock the European Deposit Insurance Scheme (EDIS), the banking union’s missing piece. It is the most controversial pillar, adding to the single supervisory system and the single resolution mechanism for Europe’s systemic banks.
After almost five years of staunch opposition, Scholz said early this week that Germany was ready to support a watered-down version of EDIS, as a reinsurance scheme of national deposit guarantees.
But his blessing came with a high price, including a new regulatory treatment for sovereign debt that would force European banks to significantly increase their capital provisions.
On his way into the Eurogroup meeting, Scholz insisted that completing the banking union is “key for growth and for Europe”.
The German finance minister defended his proposal, saying it “will help to get the necessary progress so that all over Europe a new debate on the banking union will start”.
In return for his support to EDIS, Scholz also demanded a harmonisation of national insolvency schemes, further reduction of banks’ ‘bad loans’, and an agreement on a proposal for common corporate consolidated tax base.
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