German Finance Minister says EU banking union must first focus on risk reduction

WASHINGTON (Reuters) – German Finance Minister Olaf Scholz on Thursday effectively rejected calls for the swift introduction of a EU-wide bank deposit guarantee system as part of a banking union, saying that step could only follow a reduction in banks’ exposure to risk.

“With regard to the banking union, when we have managed to effectively reduce risk we can begin talking about further risk sharing,” Scholz said according to the text of a speech delivered at an International Monetary Fund (IMF) event.

“This is not an either/or scenario. It’s the right sequencing that matters,” added Scholz, a Social Democrat in conservative Chancellor Angela Merkel’s grand coalition.

Scholz also made clear that Germany wanted to engage with its European partners and to take an active role in giving new impetus to the EU and euro zone.

“Germany’s interests remain permanently anchored to those of the EU and those of the euro zone. Europe, for Germany, is the most important topic on the national agenda.”

He played down differences in emphasis between EU and euro zone members.

“We want to show that in the euro zone there is no contradiction between structural reforms and solidarity, between sound public finances and investment in the future, between risk reduction and risk sharing. They are not contradictory, they are complementary,” he said.

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