Banking union: Bercy awaits clarifications from Berlin

Posted on Dec 5, 2019 2021 at 7:15

The hand extended by the new German coalition to its European partners on banking union is greeted with polite reserve by France. “It opens up a space for discussion which should be taken advantage of, but there are many aspects to be clarified”, indicates a source close to Bercy.

Bruno Le Maire, who has already spoken on the phone with Christian Lindner, the very Orthodox president of the FDP supposed to become Minister of Finance, will not fail to address the subject during their first official meeting, expected after his inauguration scheduled for 8 December.

Positive sign

The Social Democratic Party (SPD), the Greens and the Liberals (FDP) have made the completion of the integrated banking market one of their priorities, going so far as to include it in black and white in their government program. A first that has not escaped Paris.

As a sign of openness, they proposed the creation of a “European reinsurance of national deposit guarantee systems”. This would be an alternative to the European deposit guarantee fund for savers, a mutualisation project that Berlin has always rejected.

If the idea had been put forward in a personal capacity in 2019 by the Minister of Finance (SPD) Olaf Scholz, who is to succeed Angela Merkel as chancellor on December 8, the fact that it is supported by the whole government signals a real will, which we consider positive in Paris.

Strong conditions

But the conditions already imposed by Berlin on any progress on this aspect considered central to the banking union bristle the specialists of Bercy.

Firstly, the traffic light coalition, as the new team is called, refuses that this system costs additional money to savings banks (Sparkassen) and mutual banks (Volksbanken), which already have their own solidarity system and represent more than two thirds of the German market.

“If this is the case, it would be a condition that would undoubtedly be unacceptable for other states,” a source close to Bercy creaks. If all the European states ask for an exception for important parts of their banking system, the banking union is not possible ”.

Second, the new German government is making it a condition of reducing risks to banks’ balance sheets. “It will be necessary to clarify what risks it would be, adds the same source. Since the crisis, banks have significantly reduced their bad debt portfolios, and at the same time increased their protection buffers. “

Battle horse

Third, Berlin reiterates its demand to reduce banks’ exposure to sovereign debt. This is an old hobbyhorse for Germany, which wants to break the vicious circle of dependence between banks and states, but also a red line for Italy.

French banks, which would be among the winners of a more integrated market, share Bercy’s reserves. “These strong conditions do not make it easy for the European Commission to reopen the case,” said a spokesperson for the French Banking Federation.

France, which takes the rotating presidency of the European Union in January, still wants to grab the ball. For Bercy, as long as we respect the ambition of a single European banking market, it is not the deposit guarantee that should block things.

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