ASSESSMENTS

Dim Chances for a European Banking Union Breakthrough

Dec 27, 2017 | 19:53 GMT

When Mario Dragui, seen through the lens of a television camera, steps down as the head of the European Central Bank in 2019, the odds-on favorite to replace him will be Germany's Jens Weidmann.

Mario Draghi, president of the European Central Bank, speaks to the media following a meeting of the ECB Governing Council on December 14, 2017, in Frankfurt, Germany. Today's was the last meeting of the year and comes on the heels of new economic data that show a strong and ongoing recovery for the eurozone, with 2.6 percent growth in the third quarter of 2017. (Editors Note: The picture has been taken with a TV camera in front.)

(Thomas Lohnes/Getty Images)

Highlights

Negotiations over the future of the European Union in 2018 will include talks on completing a banking union, which would first require the creation of a blocwide deposit insurance system.
The deposit insurance scheme faces strong German and Dutch opposition based on their reluctance to share risk with Southern European banks, which they view as too fragile.
Proposals to address the issues of nonperforming loans and sovereign debt exposure may not be enough assuage the Northern European concerns.

Since the start of this decade, Europe has contended with financial crisis, a migrant influx and a wave of political insurgency. Now, with elections in the major EU economies complete, the bloc's leaders are looking forward and will undertake difficult negotiations in 2018 with the potential to shape the future of the European Union. The talks will help answer a fundamental question that has long loomed over the bloc: Does its future lie in deeper integration or in looser ties among its members, or will the status quo prevail? Of all the topics under discussion, the most difficult -- and arguably most important -- negotiations will focus on the vexed subject of a European banking union. If Europe is indeed to integrate further, the next major step would be to complete the unfinished banking union. To do so would require all states in the eurozone to participate in a mutual...

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