April 12, 2018 / 3:33 PM / 10 months ago

UPDATE 1-German conservatives dismiss prospect of quick euro zone reform

(Adds reactions from SPD)

BERLIN, April 12 (Reuters) - A senior lawmaker from Angela Merkel’s conservatives on Thursday rejected a push by France to agree on a European-wide deposit guarantee scheme by the end of June, as a first step to strengthening the financial resilience of the euro zone.

Euro zone member states are discussing deeper integration of their economies, focusing on a banking union and the transformation of the European Stability Mechanism (ESM) bailout fund into a European Monetary Fund.

One element still missing from the banking union is a European Deposit Insurance Scheme (EDIS) for the entire euro zone, which would bolster the confidence of savers and protect deposits of up to 100,000 euros in any euro zone bank.

French Finance Minister Bruno Le Maire said last month Germany and France must make progress on the joint deposit guarantee scheme by June.

But Ralph Brinkhaus, deputy leader of Merkel’s conservatives in the Bundestag lower house of parliament, said his fellow lawmakers were sceptical of increased risk-sharing among euro zone members.

“I don’t see that we will make substantial progress by the end of June,” Brinkhaus told reporters in Berlin. He added that conservative lawmakers were “far, far away” from backing EDIS.

The responsibility for economic and political decisions in Europe has to remain with individual member states and must not be made collective, Brinkhaus said.

The centre-left Social Democrats (SPD), Merkel’s junior coalition partner, insisted that now was the time to push for ambitious euro zone reforms as agreed in the coalition deal.

“These clearly include courageous steps to strengthen the economic and monetary union, for example through an investment budget for the euro zone or the establishment of a parliamentary-controlled European Monetary Fund,” said Achim Post, deputy leader of the SPD lawmakers.

But Post admitted that some of the discussed reforms still needed time. “This certainly applies, in particular, to the establishment of a European deposit-guarantee scheme,” he said.

Brinkhaus also rejected a proposal from the European Commission to create a synthetic “safe asset” that would offer investors an alternative to sovereign bonds.

“I think it’s a fishy proposal and I’m worried that this would lead to euro bonds by the backdoor,” Brinkhaus said.

Berlin has long been opposed to the introduction of jointly issued sovereign bonds, also called euro bonds. German taxpayers are concerned that any attempt to mutualise debt with other European nations with less budget discipline would mean they ended up footing the bill for other governments’ failures.

The euro zone’s bailout chief, Klaus Regling, has urged governments to find a compromise over ambitious reform for the single currency bloc. He warned that lack of action carried the risk of missing a crucial window of opportunity.

Regling said political momentum was being lost as governments quarrel over how to advance the banking union and create new eurozone instruments. (Reporting by Tom Koerkemeier and Michael Nienaber Editing by Alexandra Hudson, editing by Larry King)

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