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In no euro area country is opposition to plans for an EU banking union stronger and more widespread than in Germany. From full-page advertisements to an open letter signed by more than 170 economists, the rejectionists are proving vocal and determined.
Initially, the financial markets reacted positively to the unexpected decision by Eurogroup heads of government at a late June summit, to establish a single supervisory mechanism as a "matter of urgency"... But Germans were stunned by the news. Three days before the summit, Chancellor Merkel had not only told Berlin lawmakers that there would be no mutualised euro-denominated bonds "as long as I live", but also that "the euro rescue funds will only lend to governments and not directly to banks that need recapitalisation". Yet the Eurogroup decision seemed to open the way to a €100 billion recapitalisation (bailout) for Spanish banks.
The respective cooperative bank and savings bank associations are mobilising to fight the "SSM monster". But the German banking industry is split. Reaction from the private banking sector is more positive, with Deutsche Bank - the only global German bank left - in the vanguard within the Association of German Banks (BdB) which represents the private banks.
Some see a hidden motive behind the more positive Deutsche Bank approach towards banking union. As by far the largest contributor to the private banks deposit guarantee scheme Deutsche Bank has a strong incentive to move into a new system with more burden-sharing by other banks, it is said.
Peer Steinbrück, Merkel's former finance minister, now directly challenging her as SPD candidate for Chancellor, is putting forward radical financial reform proposals. These include a strict separation of commercial and investment banking which would lead to the break up of Deutsche Bank.
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