‘We won’t waste the crisis’: Germany’s new finance minister open to EU reforms

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BERLIN, Jan 10 (Reuters) – Germany’s new Finance Minister Christian Lindner on Monday underlined Berlin’s readiness to reform the European Union’s fiscal rules and find ways to strengthen the bloc’s finance sector by completing its banking union.

Speaking to reporters ahead of a meeting with Paschal Donohoe, head of the Eurogroup of euro zone finance ministers, Lindner said he wanted the EU to focus on the recovery from the pandemic by implementing its debt-financed, 750 billion euro recovery fund, called Next Generation EU.

“We’re responsible to make a success out of this. I think it’s more important than the debate on the fiscal rules,” said Lindner, leader of the fiscally cautious Free Democrats (FDP), junior party in Chancellor Olaf Scholz three-party coalition.

But Lindner stressed that Germany’s new coalition government wanted to play a constructive role in the debate about how to further develop the EU’s fiscal rules, known as the Stability and Growth Pact.

In their coalition deal, Scholz’s Social Democrats, FDP and the Greens agreed that any reform of the rules should aim to guarantee growth, maintain debt sustainability and ensure climate-friendly investments. They want to simplify the rules to improve enforcement.

Asked if Germany continued to resist a cross-border mechanism to protect bank deposits, Lindner said Berlin was ready to talk about the creation of a European deposit reinsurance scheme.

“And so we are open for progress. But we have to make progress in other aspects too, for example the question of the bank-sovereign-nexus,” Lindner said, referring to the high concentration of bonds of a single sovereign in the balance sheets of banks in the same country.

“So it’s a lot to discuss. But we are open for progress – and we won’t waste the crisis,” Lindner said, echoing a line attributed to Winston Churchill that one should never let a good crisis go to waste in challenging the status quo.

Completion of the banking union, which would mean setting up a controversial common deposit insurance scheme, would sharply reduce the possibility of a major banking crisis in the 19 countries sharing the euro and in this way boost market confidence in the euro and demand for the currency.

But the issue is highly sensitive in several euro zone countries and euro zone finance ministers together with their non-euro colleagues from other EU countries have been stuck trying to agree on the deposit guarantee scheme for years.

Italy, whose banks have significant holdings of domestic government bonds, has opposed earlier proposals to limit the exposure of euro zone banks to debt of a single sovereign.

“I absolutely understand the national matters that Mr. Lindner has raised in relation to the Banking Union project,” Donohoe said.

“This is an immensely important, an immensely sensitive project. And it’s my role to hear directly from Christian his views on this topic and bit by bit to identify ways in which we can make progress,” Donohoe added.

Euro zone finance ministers will discuss the reform of the bloc’s fiscal rules and completion of the Banking Union at their next Eurogroup meeting in Brussels on Jan. 17.

(Reporting by Michael Nienaber; Editing by Alison Williams)

Germany’s new Finance Minister Christian Lindner. EPA-EFE/FILIP SINGER

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