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Speaking at the European Parliament’s Committee on Economic and Monetary Affairs, Draghi referred to the stalemate in the negotiations as a group of countries led by Germany oppose the mutualisation of risks unless banks clear up their books.
“We should not be held back by the distinction between risk reduction and risk sharing,” he told MEPs, underlining that the two concepts are complementary.
When it comes to the non-performing loans, particularly high in Greece, Cyprus and Italy, Draghi commented that the developments addressing these ‘toxic’ assets “are going in the right direction but the effort isn’t finished yet”.
In addition to the progress made on risk reduction, the ECB chief argued in favour of setting up EDIS in parallel with the banks bolstering their balance sheets, given that risk-sharing “greatly helps” risk reduction.
Draghi said a pan-European guarantee for savers would contribute to financial and economic stability as it would avoid “the risk of destabilising self-fulfilling prophecies” of bank runs, and would increase the “effectiveness of monetary policy as it would reduce financial fragmentation.
The European Commission has also insisted over the past months on progressing with risk-sharing and risk reduction in parallel.
Draghi also shared the Commission’s views on the governance of the backstop to resolve failing banks, the only block of the banking union within reach.
However, countries disagree over the process to disburse funds to orderly resolve teetering financial entities. Although an agreement was expected for June, EU leaders postponed it for the end of this year.
Draghi said that the backstop, around €60 billion coming from the European Stability Mechanism, “should be made operational as soon as possible and be given swift and efficient decision-making procedures.”
Asked about a European Unemployment Insurance Scheme, one of the ideas included in the Franco-German proposal to bolster the EMU, Draghi said that “it is the right thing to do”.