June 18, 2012
Against the background of a renewed escalation of the crisis, market expectations are building ahead of the June 28-29 summit that EU leaders will take decisive action towards a fiscal and banking union. While the European Commission is pushing for a pan-European deposit scheme in the context of a banking union, France is reverting to the idea of a banking licence for the ESM, while Italy and Spain are emphasising the need for eurobonds.
The unrealistic expectations are unlikely to be met. While some sort of fiscal and banking union is necessary to complement monetary union, this is most certainly a medium-term undertaking. Not only does the legal and institutional framework have to be worked out thoroughly at EU level and anchored in national constitutions, more importantly, most of the elements discussed – already in the context of the banking union – will encounter resistance from a number of EU members, above all the UK.
It is almost certain that the new integration steps cannot be pursued in the context of the existing treaty but that they will have to follow the course taken for the fiscal compact, i.e. a new intergovernmental treaty. Also, new institutions, decision procedures and elements of democratic legitimacy will be required. The major challenges for such a two-speed Europe will be to keep the coherence of the EU-27 in other policy areas that need to be addressed at the global level and to leave the door open for new EMU members.
© Copyright 2013. Deutsche Bank AG, DB Research, D-60262 Frankfurt am Main, Germany. All rights reserved. When quoting please cite “Deutsche Bank Research”.
The above information does not constitute the provision of investment, legal or tax advice. Any views expressed reflect the current views of the author, which do not necessarily correspond to the opinions of Deutsche Bank AG or its affiliates. Opinions expressed may change without notice. Opinions expressed may differ from views set out in other documents, including research, published by Deutsche Bank. The above information is provided for informational purposes only and without any obligation, whether contractual or otherwise. No warranty or representation is made as to the correctness, completeness and accuracy of the information given or the assessments made.
In Germany this information is approved and/or communicated by Deutsche Bank AG Frankfurt, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht. In the United Kingdom this information is approved and/or communicated by Deutsche Bank AG London, a member of the London Stock Exchange regulated by the Financial Services Authority for the conduct of investment business in the UK. This information is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. and in Singapore by Deutsche Bank AG, Singapore Branch. In Japan this information is approved and/or distributed by Deutsche Securities Limited, Tokyo Branch. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product.