Germany hopes to spread bank costs
After scuppering a deal on European aid to Greece, can Germany now request financial solidarity from its European Union partners? It may sound like a stretch, but this is what Finance Minister Wolfgang Schaueble seems to be asking.
As part of a package of measures to strengthen oversight of the banking system, on Tuesday the German government gave a general outline of the bank levy it wants to force on financial institutions to help pay for future bailouts.
Schaueble’s suggestion that the fund should be part of a larger pan-European effort implies that German banks might be shored up by countries with stronger banking systems. The idea will be greeted with limited enthusiasm in France, Italy and Spain.
A consensus on the principle of a bank tax has been growing in Europe ahead of the publication of an International Monetary Fund report on the subject, due in a few weeks. But some countries didn’t wait for an internationally co-ordinated approach to sketch out their plans.
Barack Obama, the U.S. President, shot first, in January. Then Gordon Brown, the U.K. Prime Minister, indicated he would favour a tax that would be part of the general budget. France also seems to lean toward the just-another-tax approach.
Such a levy would risk being lost in the general state revenues and used to help reduce ordinary — and rising — budget deficits. Such a blurring of insurance and tax funds would only reinforce the unfortunate impression that public money is the natural source of financing of future bank bailouts.
A dedicated vehicle has the advantage of transparency. But the 1-billion ($1,37-billion) Germany intends to raise annually, according to Schaueble’s previous statements, would be much too small to matter.
Soffin, the taxpayer-financed German bailout fund created last year, has already granted more than 170-billion ($233,35-billion) of credit guarantees and capital to the banking sector.
It’s easy to see why Berlin wouldn’t mind getting a bit of help from its neighbours. But why would they agree?
