Today’s meeting of EU finance ministers will grapple with banking union and next year’s stress tests though with no German government in place, a leap forward is unlikely.
One German official seemed pretty clear yesterday, saying: “We don’t want a mutualisation of bank risks.” That, some would argue, takes the union out of banking union and is certainly a very different approach to the one promised last year when EU leaders were scrambling to keep the euro zone together.
Some experts argue that with the European Central Bank pledging to support euro zone governments come what may, the urgency has been taken out of banking union and that next year’s health checks and cross-border supervision under the ECB is going far enough. Any holes in bank balance sheets can comfortably be filled by creditors and governments.
Others say that without a backstop fund underwritten by all euro zone member states as lenders of last resort, the currency bloc is in little better shape to withstand the next banking crisis, whenever that may come (history suggests it surely will). You certainly don’t hear any talk of a mutual deposit guarantee any more, which was billed as the third plank of banking union.
The decisions of Ireland and Spain to exit their respective sovereign and banking bailouts without seeking any financial backstop to ease the way denotes confidence in the near-term at least and it’s true that bond market pressure has been notable by its absence all year.