A plan to set up a eurozone insurance for bank deposits is the key priority of the European Union to boost the bloc’s economy, top EU officials said on Tuesday, pushing for a deal that has been fiercely opposed by Germany.
A European-level guarantee for savers is seen by many as a necessary complement to existing national bank guarantee schemes, which in some countries may not be able to protect deposits up to €100,000 ($110,170) as EU rules require, Reuters reported.
“I’m convinced that setting up and finishing the banking union will be more important for economic recovery than any other projects at the moment,” the head of the eurozone finance ministers, Jeroen Dijsslebloem, told EU lawmakers in a hearing at the European Parliament in Strasbourg.
The banking union is a three-leg EU project devised after the 2009-2012 eurozone debt and banking crisis. A common bank supervisor and a bank resolution fund have already been established but the third pillar of the project, the European deposit guarantee scheme, has been stalling mostly because of opposition from Germany.
“What could be more urgent than protecting the savings of our citizens and reinforcing their trust in the banking system?” the head of the European Commission Jean-Claude Juncker told lawmakers at the same hearing, reiterating his appeal to reach a quick deal on this issue.
Leaders of the 28 EU nations will discuss how to make progress on the banking union in their regular yearend summit meeting in Brussels later this week.
“Work should rapidly advance as regards completing the banking union to enhance financial stability in the euroarea,” the draft conclusions of the leaders’ summit say, backing a “gradual introduction” of the EU deposit insurance scheme.
Germany, the EU’s biggest economy, opposes the plan because it fears that money set aside by its banks may be disproportionately used to rescue depositors in other eurozone countries.
ECB Under Draghi
Four years after Mario Draghi took the helm at the European Central Bank, eurozone inflation is close to zero and the impact of the ECB’s ultra-easy monetary policy is mainly visible in the price of financial assets such as stocks.
Consumer price growth was 0.1% in November, eight months into the ECB’s €1.5 trillion ($1.65 trillion) asset-purchase scheme, scheduled to run until March 2017 and aimed at bringing inflation back to the ECB’s target of almost 2%.
The Euro STOXX 50 index of large eurozone companies is up more than 30% since Draghi first cut interest rates in November 2011, even after a sharp fall over the past eight months.
Eurozone stocks have been mostly rising and bond yields falling since Draghi’s July 2012 pledge to do “whatever it takes” to save the euro. That effectively paved the way for quantitative easing and helped end speculation about a break up in the euro club.
Lending to eurozone companies stopped shrinking earlier this year but is still growing at a very modest clip.
