Thread by @lucasguttenberg

The opening of @OlafScholz on banking union is encouraging for two reasons: It signals that political talks can start. And it gives a constructive idea of what the @BMF_Bund actually wants on banking union. But there is one important caveat.
Thread:
ft.com/content/82624c…

1/ First, this is good because it signals that Scholz is ready to open political talks on the future of banking union including deposit insurance. The current status is that there are technical talks (read: below ministers) to define a "roadmap for political talks" by December.

2/ So Scholz signals here: We are ready to open the political phase of the talks on EDIS. This can seem procedural, but it matters: It has the potential to move the debate on a new level where ministers give actual political guidance.

3/ Second, the @BMF_Bund gives us now a clear idea of its own vision of the "steady state" of banking union. It explicitly accepts that EDIS should be part of that steady state and that there is a good rationale for it. This is good on substance but even more so on process.

4/ It means there can be negotiations at all. I often heard from Paris that "a few years ago the Germans wanted hawkish things - now they want nothing at all." That could change with this move.

5/ But of course: This does not mean the BMF just accepts EDIS. The proposed package contains three big other pieces that other member states hate: New reg treatment of sovereign bonds (the South); insolvency harmonisation for small banks (Italy); corporate taxation (IRL, LUX).

6/ So at any point in the process, the German side will be able to retreat to a position that says: We have always said this is a package and it all needs to be there at the same time. But it is a constructive position and that is what matters.

7/ But there is a huge caveat: This is Scholz, not the government for now. And there is a cautionary tale for this from the not-so-recent past: The Silent Death of Unemployment Reinsurance.
Remember, Scholz had a huge opening on this in summer 2018.

8/ But it never became government policy. Instead, a few months after the announcement it died at the technical level in inter-ministry coordination. The CDU did not want it - and the SPD did not fight for it.

9/ So the crucial question is: How will the CDU react? And is the SPD and Scholz ready to spend political capital on this to make this the official government position? The next days will be interesting to watch, in particular as the situation in Berlin is so messy already.

10/ It is not even completely clear to me who on the CDU side would decide if they are ok with the "EDIS-is-necessary-in-principle" position. Chancellery, CDU group in the Bundestag, the party all have stakes in this.

11/ So this is a good step on process but do not pay too much attention to the technical details. Do take it as an opening but do not buy this as the new German government position. And watch what comes next - now comes the important part.