The Limits Of German Team Game
BNP Paribas | Oct 20, 2013 04:57AM ET
- Germany, one of the first European firewalls
- still lags behind regarding the banking union
It is hard to accuse Germany of isolationism in the face of the European sovereign debt crisis. It ratified the European Stability Mechanism (ESM) and injected nearly EUR 200bn of its own capital, contributing more per capita than France. Whether via the Eurosystem or EMS, it is the country that has made the biggest commitments to Greece. Germany, the largest shareholder in the European Central Bank (ECB), did not block the central bank’s massive loans to the southern eurozone banks. Nor did it officially oppose Outright Monetary\ Transactions (OMT), a programme that aims to facilitate the financing of governments, a form of monetisation that Germany abhors. Yet although relatively conciliatory on paper, Germany is still reticent about risk sharing.
OMT has been saddled with sufficiently restrictive regulations to ensure Berlin that no government will ever be tempted to use it. The regulations negotiated as part of bail ins to resolve the banking crisis also considerably limit the probability of direct intervention by the ESM. Moreover, they will not apply until 2018. Until then, Germany does not want to be held accountable for the troubles encountered by any financial institutions other than its own.
BY Jean-Luc PROUTAT
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