EU Commission pulls up Germany and 11 more for imbalances: Moots mandatory deposit insurance for euro zone banks
The European Commission has taken a serious note of the potential economic imbalances in 12 of the 19 euro-zone countries including Germany, which is Europe’s top economy.
The commission warned that it will take a closer look at these states under its existing monitoring mechanism. The European Commission had raised similar concerns in 2014 as well.
Regarding Germany, the EU commission said its export-focus and high trade surplus are matters of concern and can make it vulnerable to a possible economic slowdown.
“The very large and increasing external surplus and strong reliance on external demand exposes growth risks and underlines the need for continued rebalancing toward domestic sources,” the commission said, reports Bloomberg.
Those governments already warned are expected to take corrective policies as EU has provosion to slap financial penalties on errant states, if they do not act on the economic front.
The commission also put France, Italy, Ireland, the Netherlands, Portugal, Spain, Belgium, Slovenia, Finland, Austria and Estonia on its watch list to study economic imbalances. Even the six countries outside the euro zone such as Britain, Sweden, Romania, Bulgaria, Croatia and Hungary will undergo fresh monitoring. The EU commission will publish the findings of its economic monitoring by February 2016.
Bank deposit insurance
Meanwhile, the European Commission is pressing ahead with a common European Deposit Insurance Scheme for bank deposits to protect depositors in the euro zone from bank failures.
The proposed scheme will salvage savings deposits worth 100,000 euros ($106,480) per depositor. This will be part of the efforts to forge a complete banking union that will work as a resilient monetary union, according to Dombrovskis, European Commission Vice President for the Euro and Social Dialogue, reports DW News.
He said insurance protection for deposits is necessary to reduce risks in the banking sector. The EU official added that there is a link between the financial health of banks and the governments and noted that maintaining the solvency of banks is important in the light of what happened in Greece.
“Taxpayers should not be first in line to pay for failing banks,” Domvrovskis said.
The euro zone has already introduced two important steps for forging a complete European banking union. They include the elevation of a single supervisor for all major eurozone banks, under the Single Supervisory Mechanism (SSM) and a Single Resolution Mechanism (SRM) with the mandate to wind up failing banks. The European Central Bank (ECB) will look after the SSM and SRM functions from January 2016.
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