Germany is open to closer European coordination to resolve the euro area’s banking troubles as the government backs moves to deepen political and economic union, Finance Minister Wolfgang Schaeuble said.
Schaeuble’s backing for efforts to tighten banking cooperation, made in an interview published in today’s Handelsblatt newspaper, follows comments by Chancellor Angela Merkel last night in which she said that systemic banks may need supervision at the European level.
Ratification of the fiscal pact locking in debt and deficit limits “is one step, but it’s not yet sufficient,” Merkel told reporters in Berlin before talks with European Commission head Jose Barroso. “So we will also talk about to what degree one has to bring the systemic banks under specific European supervision to keep national interests from playing too large a role.”
German officials are stressing efforts to push for closer union in Europe as the financial crisis in the euro region shifts from Greece to Spain’s banks. Spanish Budget Minister Cristobal Montoro said today that European institutions should help shore up the nation’s lenders, the first call for outside funds. Germany says Spain should tap the bailout fund if needed.
Finance ministers from the Group of Seven countries plan to hold a call today to discuss the debt crisis in Europe.
Schaeuble reiterated the government’s rejection of debt sharing as a solution, telling Handelsblatt the euro region needs “a real fiscal union” before joint debt management can be discussed.
Asked whether the German government might consider a redemption fund as proposed by its council of economic advisers, Schaeuble said that Barroso and European Central Bank chief Mario Draghi were charged by European leaders with “developing a concept for how we can achieve fiscal union as a next step after the fiscal pact” and the permanent rescue fund. “But that’s a medium-term project,” he said.
The redemption fund is among measures on the agenda for talks due today between Germany’s opposition parties and the government. The opposition is pressing for concessions from the government on growth and other steps in return for the support Merkel needs to pass the fiscal pact in the German parliament before July 6.
Resolving the crisis will require a mix of short- and longer-term measures, including a so-called banking union as proposed by Barroso, Schaeuble said. He said the proposal consists of three elements: a central banking oversight body; deposit guarantees; and “the question of whether, and if yes, how we can develop national bank restructuring facilities into more of a European network.”
Merkel, whose meeting with Barroso was aimed at preparing for an EU summit on June 28-29, said that Germany was open to discussing more common economic policies as the 17-nation euro region strives for “more Europe, not less.”
“The world wants to know how we see the political union in complement to the currency union,” Merkel said. “That requires an answer in the foreseeable future and Germany will be a very constructive partner.”
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