Scholz Op-Ed in the FT widely read as opening the way to the completion of banking union. Thoughts 1/ ft.com/content/82624c…
1) I wholeheartedly agree we need common insolvency procedures on top of single resolution. The case of the Venete banks illustrates what happens when regulatory perimeter of insolvency and resolution is mis-aligned between country and EU level.
2) It is certainly important that a German finance minister takes the step of acknowledging the obvious, i.e. that Europe needs a complete BU and a complete BU needs a deposit insurance. I'd have cut the self-righteous "it is no small step for a German FinMin" bit.
3) What Scholz effectively opens to is a process of re-insurance where "a limited loss coverage component for the European deposit insurance fund COULD be considered, ONCE all the elements of the banking union have been fully implemented."
4) This is again a sequencing of (yet more) risk reduction first, and then we'll see. The prerequisites include RWA of sovereign holdings, which countries like Italy are and will be adamantly against (despite Scholz trying to say it "would help countries with weaker ratings")
5) Another condition is the adoption of a common corporate tax base and a minimum effective tax. We certainly need to put an end to tax competition within the EU, particularly when the EP itself stated that 7 EU countries display traits of tax havens (LUX, IE, NL, and friends)
6) But should we subject the completion of BU to a reform of EU tax policy, which has to be decided under unanimity - thus giving each of those 7 countries the power to hold BU hostage of their tax veto power? Does not strike me as a good idea, if you really want to complete BU
7) Conditioning EDIS to 2 reforms that will face solid vetoes makes this look more like a fig leaf than a real opening. Maybe, it's a signal that DE feels the heat of challenges even DE can't face alone (Brexit, Trump), and is worried of having made too many enemies for itself?
