Will This Banking Compromise Satisfy Germany?

While many of the European Union’s 27 countries support the European Central Bank’s proposed banking union, Germany and Great Britain have had reservations. But as Reuters reported on Wednesday, Germany has indicated that it is ready to back the ECB as the chief supervisor of banks, which is an important step towards implementing the policy as all members of the EU must approve the union for the project to progress.

“We hope for major progress and perhaps a breakthrough (in the talks),” a German official told the publication anonymously. “We have some questions but if they can be resolved by finance ministers today then Germany will not stand in the way of an agreement.” He also added that Finance Minister Wolfgang Schaeuble informed the German cabinet that he was “optimistic” about the deal before EU finance ministers met in Brussels on Wednesday.

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According to Reuters, a banking union would put an end to the “piecemeal crisis-fighting measures” that the ECB has used over the last three years by laying a “cornerstone for deeper economic and fiscal reforms.” Furthermore, it would be the first joint attempt by the euro zone to develop a unifying policy to deal with problem banks. EU leaders are counting on the single banking authority to establish a resolution fund that will prevent banks from dragging member states into crisis in the future.

Finance ministers from all member states must still settle how many banks the ECB should directly supervise, but Germany has more pressing concerns. The country’s leaders are worried that once a plan is set to handle failed banks, Germany will be left to bear the brunt of the cost. It has also brought attention to the potential conflict of interest that could arise between the ECB’s role as a banking supervisor and its role in determining monetary policy…