23 February 2016

OMFIF: Self-interest and the euro

[...]Last November, the European Commission published a proposal for a European deposit insurance scheme (EDIS). This month Ludger Schuknecht, the German finance ministry chief economist, published a critique of the proposal, unusually in English. We can perhaps take it that this is Germany’s official and considered response to the Commission’s carefully argued proposal.

[...] the heart of the matter: German policy-makers fear that German taxpayers might have to pay for the failure of other countries’ banks. [...]

It is hard to avoid the conclusion that this is a fair reflection of the German government’s entire opposition to EDIS. In this sense, Schuknecht’s critique has provided a valuable service. The finance ministry’s chief economist has shown us that, in defining the needs of the euro area and the single currency, national self-interest is the dominating influence. If this is true for the euro area’s largest economy and biggest creditor, then it is likely to be true of other member states. Over the migration issue, Germany has been calling for more European solidarity. In money and finance, this characteristic is conspicuously absent.

Full article on OMFIF

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