The finance minister has said Berlin should support a common deposit insurance scheme, albeit with some caveats. With Brexit in mind, it is time for the EU to boost its efforts to "deepen and complete a banking union."
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German Finance Minister Olaf Scholz said on Wednesday the European Union needs to increase its pace regarding leading banking projects and signal a willingness to compromise on the EU-wide bank deposit reinsurance, in an op-ed for the Financial Times.
Scholz said failure to do so could be costly and leave the bloc vulnerable to "being pushed around on the international stage," particularly in light of the imminent withdrawal of the United Kingdom from the Union, Scholz wrote in a guest article for the global business publication.
He said that due to Brexit, it was time for the bloc to promote better integration of its banks, especially with the loss of London, the EU's largest financial center.
He added: "The need to deepen and complete European banking union is undeniable. After years of discussion, the deadlock has to end."
Possible breakthrough on scheme to protect savers' deposits
The long-discussed joint deposit guarantee mechanism is controversial, especially in Germany. It is feared that German savers will be accountable for problems encountered by financial institutions in Southern Europe.
However, Scholz has abandoned the federal government's long-standing resistance to the system, albeit with suggested alterations. In an eight-page document entitled "Position Paper on the Target Image of the Banking Union" submitted to German magazine Der Spiegel, the finance minister proposes a "European Reinsurance System" for bank deposits. This is intended to prevent a run on credit institutions in the event of a crisis.
This proposal would involve an EU-wide bank deposit reinsurance, a scheme that would significantly enhance the resilience of national deposit insurance.
Unity required
Scholz wrote that the financial markets in Europe remain divided, with barriers to free flow of capital and financial liquidity still in existence. In addition, and partly as a result, a need for uniform taxation of banks in Europe is crucial in order for the EU to move forward.
To complete the banking union, there must be, among other things, "a form of common European deposit guarantee mechanism," the SPD politician continued. "And that is not a small step for a German finance minister," he admitted.
Scholz's comments will be contentious. Berlin has previously indicated that the initiative — in a so-called non-paper, for discussion only — was Scholz's alone and had not been approved by German Chancellor Angela Merkel. It remains unclear as to whether she will support her finance minister's proposal.
Looking to the future
Scholz also said that being dependent for financial services on either the United States or China is not viable, especially as the EU was at a crossroads with Brexit on the horizon. The risk of being reliant on the aforementioned superpowers is reason enough for the bloc to make headway.
Until now, it has not been possible to further improve the institutional and regulatory framework in order to reduce risks in the European banking sector, according to the German finance minister. Now was the time for a change, particularly in view of Brexit and with the momentum of a new European Commission. Indeed, incoming President Ursula von der Leyen has also declared the completion of the banking union a priority.
Germany's biggest wastes of taxpayer money in 2019
A bridge for mice, a stolen golden nest and a solar plant set up in the shade are just a few cases that drew ire from the German Taxpayers Federation in this year's public spending "black book."
Image: picture-alliance/dpa/M. Schutt
Solar flower power, in the shade
Every year, the German Taxpayers Federation keeps tabs on areas where they believe taxpayer money was wasted and sums up the most egregious cases in its annual "black book." The 2019 report called out Thuringia's Environment Ministry for a flower-shaped mini-solar panel sculpture that was installed in the shade. The ministry defended the flower, saying it was never supposed to power the building.
Image: picture-alliance/dpa/M. Schutt
A bridge for mice
After realizing that a new bypass road near the southern German city of Passau cuts through the natural habitat of the dormouse, officials got creative and built a bridge for the mice to safely travel over the road. The German Taxpayer's Federation (BdSt) had a bone to pick with the resulting structure ...
Image: picture-alliance/dpa/O. Schreiter
Perilous path to safety (instructions not included)
... The bridge requires mice to climb wooden rungs up 7 meters high (23 feet) and run down a passage 20 meters long in order to travel safely over the road. The project ended up costing taxpayers €93,000; the BdSt said it wasn't clear if any dormice actually use the bridge. The city of Passau said colonies of mice were found near the road. Explaining the bridge's purpose to them may prove tricky.
Image: idowa.de
Stolen but golden
This golden bird's nest was the prized possession of an elementary school in Berlin — until it was stolen. The sculpture, comprised of 74 branches made out of pure gold, was placed in a display case with supposedly shatter-proof glass. According to the BdSt, the artwork cost €92,500. Thieves tried to break in several times and managed to make off with the nest on their third attempt.
Image: picture-alliance/dpa/L. Vossen
Germany's failed highway toll
One of the standouts in this year's "black book" was German Transport Minister Andreas Scheuer's failed highway toll. Earlier this year, the European Court of Justice ruled against it, saying the toll discriminated against non-Germans. Scheuer had already signed contracts to implement it, which will cost "hundreds of millions of euros" to settle, according to the BdSt.
Germany's naval training vessel, the "Gorch Fock," became the poster child of public spending waste earlier this year when it was revealed that renovating the ship is set to cost taxpayers up to €135 million. The Defense Ministry was accused by auditors of "severe" mismanagement over the project, with the BdSt arguing it would have been cheaper to build a whole new ship.
Image: picture-alliance/dpa/C. Rehder
Scrutiny of lynx project
A project reintroduce lynxes in western Germany was also criticized. Although the BdSt agreed it is important to protect to species, they claim much of the €2.7 million budget for the project is being spent in administrative and public relations costs. The organization heading the project said protecting the lynx was more than a "noble goal," but also a legal requirement in Germany and the EU.
Image: picture-alliance/blickwinkel/R. Sturm
The quick paint job that never was
Earlier this year, the city of Hanover decided that a sculpture by US artist Alexander Calder was in need of sprucing up and installed scaffolding around it. What was supposed to be a quick paint job ended up taking much longer, as the city hadn't secured permission. Although it was never painted, the scaffolding stayed up for four months before it was eventually taken down, costing €14,000.
Image: picture-alliance/dpa/S. Schuldt
Expensive typos
Routine local elections in the city of Mainz and three other districts in the state of Rhineland-Palinate ended up costing more than expected this year after the names of candidates were misspelled. Over 500,000 new ballot papers had to be printed over typos like "Aexandra" instead of "Alexandra" and "Freidrich" instead of "Friedrich." The whole process cost €80,000.
Image: picture alliance / dpa
Pricey party
The northern city of Papenburg was called out for throwing a party at an old estate house that ended up costing €30,000 — more than double what was budgeted. Around 250 visitors were invited to an elaborate dinner with string quartet accompaniment, all on the taxpayers' tab according to the BdSt.