Time for boldness: EU banking union progress

Author: | Published: 5 Mar 2018
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Plans for a European banking union have been a long time in the making. Since 2012, the EU has been in conversation with member states to strengthen the bloc against economic shocks. These conversations have intensified over the last few weeks but Germany's acting finance minister Peter Altmaier said that clarifications on risk sharing and reduction need to be made in order to proceed to the next stage.

The talks come at a critical point in the EU's lifecycle. Brexit, rather than destabilising the union and its member states, seems to have strengthened them. Despite fears that the UK's exit would put the EU on life support, French and German leaders Emmanuel Macron and Angela Merkel have pushed ahead with plans to increase coordination now that its long-standing roadblock to further cohesion has been removed.

Positive economic figures will help their cause: the GDP of the eurozone grew by 2.5%, which is the highest level since 2007 and public opinion is favourable. In a September, 70% of the bloc said they would vote to stay in the EU if presented with the option. Brexit has not destabilised the EU as many people once feared.

But even more crucial is the German election that could easily derail any prospects of further harmonisation. Europhiles will be pleased that a breakthrough in coalition talks with Merkel's Christian Social Union and the Social Democrats has been made that avoids the nightmare scenario of the far-right eurosceptic Alternative for Germany gaining decision-making power inside the Bundestag. Sighs of relief can be heard from all over Brussels.

This feels like a point at which the EU has reached a crossroads and the UK's exit should lead to the end of what has been termed Europe à la carte. Yet inevitably some nations are not as enamoured with a banking union as Germany and France have historically been. Poland has been a vocal critic of the proposal while Austria is unlikely to accept it. Italy is expected to rock rightwards in their upcoming election and this could have potentially severe repercussions for the bloc given that it is now the EU's third biggest economy.

But as Brexit has showed, kowtowing to the demands of eurosceptics does little to improve EU support.

Some have suggested a two-tier system to keep the EU27 together, with some member states having full membership inside a union and others remaining as they are. But this solution would be only a sticking plaster to the EU's long-standing problem. The 2012 crisis showed that the EU cannot go through a crisis unscathed without having some kind of fiscal harmonisation and centralised banking sector policies to complement the monetary union.

With Britain out of the picture, the EU now has the opportunity to build an economic framework that is fully resilient to economic shocks. It's their move.