11 February 2016

POLITICO/Padoan: ‘Eurozone needs a finance minister’

The eurozone needs its own finance minister and must accelerate integration of its banking and fiscal policies in order to tackle the financial, economic and migration crises it faces, Italy’s Finance Minister Pier Carlo Padoan told POLITICO.

Padoan’s remarks will fuel the debate over the future of the European Union at a time when its political, financial and economic institutions are under severe strain. The minister’s backing of a eurozone finance minister is also likely to open another front in the battle between Germany and Italy over whether to pool more resources to tackle the EU’s many challenges.

“I am very much in favor of moving towards the creation of an institutional figure,” the minister said in an interview in Rome. “The real question is not whether we like it or not but what do we ask of it. What would be the mandate for a single euro-area finance minister?”

Italy is more in favor of sharing of financial resources than other European countries, notably Germany, which is sensitive to the suspicion among German taxpayers that they are paying for other countries’ mistakes.

Padoan, a former senior official at the Organisation for Economic Co-operation and Development (OECD), who joined Matteo Renzi’s government in 2014 as a non-political appointee, highlighted two main duties for the proposed new eurozone minister: mastering common resources to deal with crises such as migration and ensure financial stability; and coordinating economic policies to avoid imbalances among eurozone members. [...]

German reticence

Padoan said the eurozone should do more to “mutualize risk-sharing,” or, in other words, create common funds to deal with economic and financial issues. This is a sore point for Germany, which has led opposition to the creation of a pan-European scheme to insure bank deposits up to a defined amount.

Padoan has spoken before about the need for further integration, but his latest intervention comes only days after François Villeroy de Galhau, head of the Banque de France, and Jens Weidmann, the Bundesbank chief, said a number of financial and economic projects would require greater sharing of sovereignty by EU countries, a more unified European administration and the creation of a finance ministry for the eurozone. Weidmann later toned down his comments, saying that the idea of a common finance minister would be unenforceable.

Italian officials interpreted the backtracking as a sign that Germany is less keen on the idea of finance minister and more focused on introducing new rules, such as the proposal to force banks to put up capital against certain types of sovereign bonds. Italy, whose banks hold a large amount of domestic government debt, is against the proposal.

Padoan said he wasn’t sure what the Bundesbank meant with the proposal because it didn’t say what the finance minister would do. “The way I interpret the German position on this and other matters is: ‘Let’s avoid that excessive risk-sharing makes some countries pay for the mistake of others,’” he said.

“And that’s fine, I guess every country wants to pay its fair share, but at the same time if we are convinced about building up a union then we must share something.” [...]

Full article on POLITICO

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