Germany’s Social Democrats voted overwhelmingly to join a “grand coalition” with Chancellor Angela Merkel’s conservatives. The government will offer broad continuity with some tweaks, the reappointment of Wolfgang Schaeuble as finance minister testifies to that. But could it unlock some euro zone policy doors after three months of limbo?
The big item on the agenda of an EU summit late this week is banking union. What results will dictate whether the seeds of a future financial crisis have been sown. Thanks to our exclusive at the weekend, we know that the latest proposal will see the cost of closing down a euro zone bank borne almost fully by its home country while a euro zone fund is built up over 10 years.
Key euro zone finance ministers will meet in Berlin today (as they did without success 10 days ago) to try and reach agreement in time for the summit. A full meeting of euro zone finance ministers is slated for Wednesday but it could take a bilateral meeting with the newly anointed Merkel and French President Francois Hollande to break the logjam.
Critics say the plan is a pale shadow of what was proposed in 2012 which, lest we forget, included a commonly funded backstop for failing banks and a mutual deposit guarantee which has long since bitten the dust.
Under this plan, the costs of closing a bank in year one would be fully covered by a fund set up by the home country where the bank resides. Such funds in every euro zone country would be paid for by the banks. The funds will reach a full size of 1 percent of all covered deposits after 10 years and at that point would be merged into a Single Resolution Fund which would finance all bank closures.