Germany and EU Still Feuding Over Banking Union

Wolfgang Schaeuble

Europe is still at odds over the recently proposed banking union, with Germany questioning the legality of the most recent proposal to set up a central banking authority throughout the European Union.

The current proposal would allow the European Commission to decide when a bank is failing, and whether or not that institution should be shut down or rescued. In the event of a bailout, money from member countries would be used to prop up the bank.

However, from a German perspective, this sort of proposal borders on illegal, as the EU has fundamental laws giving countries control over their own finances. Both France and Britain previously voiced related concerns in deciding how to deal with failing banks within a country, with the order of who pays in the event of collapse stirring up a heated debate. Britain and other countries have advocated for large depositors not to be liable for losses, or else the whole system could be subjected to bank runs.

Defenders of the current proposal maintain they are on firm legal ground.