April 12, 2018 / 1:09 PM / 7 months ago

German conservatives dismiss prospect of quick euro zone reform

BERLIN, April 12 (Reuters) - A senior lawmaker from Angela Merkel’s conservatives on Thursday poured cold water on French demands to agree on a European-wide deposit guarantee scheme by the end of June as a first step to strengthening the resilience of the single currency bloc.

Euro zone member states are discussing deeper integration of their economies, focusing on the completion of a banking union and the transformation of the European Stability Mechanism (ESM) bailout fund into a European Monetary Fund.

One element still missing from the banking union is a European Deposit Insurance Scheme (EDIS) for the entire euro zone, which would bolster the confidence of savers and protect deposits of up to 100,000 euros in any euro zone bank.

French Finance Minister Bruno Le Maire last month raised the pressure on Berlin by saying Germany and France must make progress on the joint deposit guarantee scheme by June.

But Ralph Brinkhaus, deputy leader of Merkel’s conservatives in the Bundestag lower house of parliament, said his fellow lawmakers were sceptical of any further steps towards increased risk-sharing among euro zone members.

“I don’t see that we will make substantial progress by the end of June,” Brinkhaus told reporters in Berlin. He added that conservative lawmakers were “far, far away” from backing EDIS.

The responsibility for economic and political decisions in Europe has to remain with individual member states and must not be mutualised, Brinkhaus said.

The senior lawmaker also rejected a proposal from the European Commission to create a synthetic “safe asset” that would offer investors an alternative to sovereign bonds.

“I think it’s a fishy proposal and I’m worried that this would lead to euro bonds by the backdoor,” Brinkhaus said.

Berlin has long been opposed to the introduction of jointly issued sovereign bonds, also called euro bonds. German taxpayers are concerned that any attempt to mutualise debt with other European nations with less budget discipline could mean they would end up footing the bill for other governments’ failures.

The euro zone’s bailout chief Klaus Regling has urged governments to find a compromise over ambitious reform for the single currency bloc. He warned that a lack of action carried the risk of missing a crucial window of opportunity.

Regling said political momentum was being lost as governments quarrel over how to advance the banking union and create new eurozone instruments. (Reporting by Tom Koerkemeier Writing by Michael Nienaber Editing by Alexandra Hudson)

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