German chancellor Angela Merkel reluctantly accepted on Friday (18 December) giving a green light to start discussions on the European deposit insurance scheme, the remaining part of the banking union.
The President of the European Council, Donald Tusk, underlined before the summit started that the EU leaders needed to make clear whether they were “ready to take difficult decisions on banking union and the economic governance”.
“There has not been as much progress as we would wish” in implementing the so-called five presidents’ report, the roadmap to complete the economic and monetary union (EMU), the European Commission president, Jean-Claude Juncker, had previously complained.
The main bone of contention in the report is the setting up of a European deposit insurance scheme.
In the end, the warnings given by the European Central Bank (ECB) and the political pressure from the Commission and the majority of member states succeeded in partly breaking Merkel’s previously staunch opposition to the idea.
However, the battle over the EU deposit guarantee scheme is far from over. “I repeated that this is something we reject”, Merkel told reporters after the European Council.
The EU leaders urged the Council to “swiftly examine” the proposals included in the five presidents’ report. “Work should rapidly advance” as regards to the banking union “to enhance financial stability in the euro area”, the summit conclusions said.
The ministers of finance will have to present the first results on this by June 2016.
Despite Germany’s opposition, EU sources considered it at least “promising” that now the ministers can start working on the Commission´s proposals to create a joint scheme to protect the European depositors with a common pot.
In the previous summit in October, the German chancellor succeeded in postponing the ‘green light’. But this time around, she not only found the largest economies pushing for the remaining pillar of the banking union, but also the warnings of the President of the European Central Bank, Mario Draghi.
Draghi said that the lack of progress to complete the banking union, coupled with the slowdown of the reforms effort in many member states could led to a downward revision of the rating of the eurozone, EU sources told Euractiv.
In order to overcome the opposition of the countries against mutualising the risks, the Commission set some conditions in its proposal, including the need to fully implement the Bank Recovery and Resolution Directive introducing the bail-in clause so the banks can cover its financing needs with its own resources.
Leaders welcome the progress
The leaders of the largest economies in the eurozone welcomed the outcome of the meeting.
Speaking after the summit, French President François Hollande said it was “very important” to complete the banking union with the deposit guarantee scheme. His comments were echoed by the Spanish prime minister, Mariano Rajoy.
The French president also “insisted” on the opportunity to strengthen the eurozone in the context of the discussions with the United Kingdom.
The day before, Hollande argued that the number and the magnitude of the current crises demonstrated that the EU with 28 member states is “different” compared to the one built decades ago by the founding countries. “EU can be a basis, but other member sates could move further and faster, and I am in favour of this”, he said while pointing out this was not a “Europe a la carte”.
Paris is particularly concerned about one of David Cameron’s demands in his bid to renegotiate the UK´s relationship with the EU. The British prime minister wants a ‘say’ in the integration path of the eurozone, to guarantee that the internal market is not affected. However, French officials fear that this could turn into a veto power over the process to bolster the eurozone.
In order to partly accommodate London’s wishes, the summit conclusions said that the completion of the EMU will be made “in full respect of the internal market and in an open and transparent manner”.
The leaders also agreed on speeding up the works on the Commission´s proposal to set up a eurozone’s external representation, another disputed idea included in the five presidents’ report and recently put forward by the Commission.