Minister for Finance Paschal Donohoe is “optimistic” that progress can be made on the completion of the EU banking union in the coming months, identifying it as “an important priority” for him in his role as president of the Eurogroup of euro zone finance ministers.
Mr Donohoe said he was “committed” to fulfilling the mandate given to the Eurogroup to finalise a work plan to complete the stalled project.
“I intend to present a balanced proposal to colleagues in the coming weeks,” he said on Thursday.
“In considering how best to take this proposal forward, we must consider the sizeable cost of inaction on banking union at this point – the signal it could send to investors – but also the risks of postponing progress until the next moment of challenge.”
The Minister was speaking at the virtual launch of Dublin City University’s Rebuild, a European-funded Jean Monnet Centre of Excellence dedicated to studying the recovery of Europe – a three-year project led by EU law professor Federico Fabbrini.
Mr Donohoe was addressing the event from Paris, where the monthly Eurogroup meeting is taking place. However, speaking on the day Russia invaded its European neighbour, the Eurogroup head made no comment on events in Ukraine.
In his keynote speech, Mr Donohoe said there was a “window of opportunity” to advance the banking union, a project that first began in the wake of the sovereign debt crisis a decade ago with the creation of a single banking supervisor and single bank resolution mechanism for lenders that fail.
However, efforts to complete the union later floundered over plans for a euro area deposit guarantee scheme, amid objections from countries – notably Germany – concerned about exposure to weaker banking systems.
“While I am aware of the difficulties and political sensitivities of this project, I am also optimistic that we can make progress, and this will be an important priority of mine in the coming months,” Mr Donohoe said.
The Eurogroup president also said it was important “to find the right balance between debt sustainability and funding growth” when finance ministers meet next month to discuss euro zone budgetary policy for 2023.
The “valuable lessons” Europe learned from the financial crisis has made it “better prepared as an economic community than we were a decade ago to face the trials ahead”, he said, also noting that the financial crisis also helped shape the EU response to the “borderless” Covid one, he said.
“When the scale of the public health crisis became evident, it was met with co-ordinated policy action at EU level to protect lives and livelihoods. Yes, it may have taken some time to get that point, and yes the early moments of it were so difficult and so challenging, but now I make the case to you that a crisis of unprecedented impact required an unprecedented EU response, and that happened.”
Mr Donohoe cited the initial €540 billion package of measures agreed at the outset of the pandemic, followed by the July 2020 agreement on a €1.82 trillion package for the 2021-27 multiannual financial framework and the Next Generation EU recovery fund, which aims to deliver “a more sustainable, more digitalised and more resilient” Europe.
“It is fair to say that this pandemic tested the solidity, the solidarity, the effectiveness of the modern European system, but I would also make the case that Europe rose to the challenge,” he said.
“In contrast to the crisis of a decade ago, we took decisive action to soften the blow of the immediate economic and health crisis, and to minimise the short-term consequences of the crisis for workers, for businesses and for member states.”
Mr Donohoe said this response to the Covid-19 crisis had “strengthened the bond” between Europeans and Europe’s “body politic” and underpinned the contemporary rationale for the EU.
“We achieve more if we act collectively. We know this is the case here in Ireland but I also believe it is acknowledged more and more across Europe too. Our citizens can see the immense practical value in the power of solidarity and in the consequences of co-operation.”
Although the EU could not yet say that the pandemic was fully behind it, the European economy was seeing “some very positive indicators of recovery”, notwithstanding the risk that inflation poses to consumer purchasing power, the Minister said.
“However, if this pandemic has taught us anything, it is the need to acknowledge uncertainty, and uncertainty associated with changing health and economic conditions.”