German turnaround: yes to the single guarantee of bank deposits

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Olaf Scholz has made "a small step for a German finance minister" by opening up a common scheme for guaranteeing savers' deposits in the Eurozone after years of German hostility that have blocked the completion of the banking union . In his speech in the Financial Times, Scholz admits that Europe's role would be put at risk if it failed to complete the integration of its financial system.

"IS undeniable need to complete the banking union. After discussions, the stalemate must end ". Brexit, which will lead to the loss of its financial center for the European Union, also means that the blockade must promote greater integration of its banks.

The reinsurance scheme
An admission that comes however accompanied by many caveats. In fact, Berlin has so far claimed that it does not want to assume guarantee obligations in the event of bank failures to avoid charging its taxpayers with failures arising from situations of risk that it cannot directly control. The reinsurance system that Minister Scholz is now talking about would act as a backstop with respect to national guarantee funds helping to ensure that governments can honor their commitment to protect deposits up to 100 thousand euros in the event of bankruptcy.

The conditions
The conditions set by Scholz's proposal, however, risk becoming insurmountable obstacles for countries with a more fragile banking system, while the proposal could create tensions in Germany. Government sources in Berlin told the Financial Times that the minister's position would not be agreed with Chancellor Angela Merkel. And even recently the president of a German banking association had reiterated that Europe "will not move better together by transferring burdens from one country to another". To overcome these obstacles Scholz accompanies his proposal a serial requests and important reforms that ensure discipline in both banacatory supervision and resolution mechanisms. Among the requests, changes to capital requirements at European level to remove the incentives for banks to purchase large quantities of the public debt of their country; further actions to reduce non-performing loans and the establishment of common European rules to calculate corporate profits. Finally, Scholz calls for harmonization of bank insolvency laws.