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Policy Brief

The fiscal implications of a banking union

Systemic banking crises are a threat to all countries whatever their development level. They can entail major fiscal costs that can undermine the sustainability of public finances. More than anywhere else, however, a number of euro-area countries have been affected by a lethal negative feedback loop between banking and sovereign risk, followed by disintegration of the financial system, real economic fragmentation and the exposure of the European Central Bank. Recognising the systemic dimension of the problem, the Euro-Area Summit of June 2012 called for the creation of a banking union with common supervision and the possibility for the European Stability Mechanism to recapitalise banks directly. The findings of this paper were presented at the Informal ECOFIN in Nicosia on 14 September 2012.

By: and Date: September 14, 2012

Systemic banking crises are a threat to all countries whatever their development level. They can entail major fiscal costs that can undermine the sustainability of public finances. More than anywhere else, however, a number of euro-area countries have been affected by a lethal negative feedback loop between banking and sovereign risk, followed by disintegration of the financial system, real economic fragmentation and the exposure of the European Central Bank. Recognising the systemic dimension of the problem, the Euro-Area Summit of June 2012 called for the creation of a banking union with common supervision and the possibility for the European Stability Mechanism to recapitalise banks directly.

The findings of this paper were presented at the Informal ECOFIN in Nicosia on 14 September 2012.

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The fiscal implications of a banking union

Policy Brief

The fiscal implications of a banking union

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Opinion

Pia Hüttl
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Why euro-zone ‘outs’ should join banking union

Joining the banking union could provide a stable arrangement for managing financial stability for the UK and other non-Euro countries.

By: Pia Hüttl and Dirk Schoenmaker Topic: European Macroeconomics & Governance Date: February 11, 2016
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Blog Post

Pia Hüttl
Schoenmaker pic

European banking union: should the 'outs' join in?

To address coordination failures between national institutions regulating banks, we need supranational policies. Banking union encourages further integration of banks across borders, deepening the single market, and could also benefit countries outside the euro which have a high degree of cross-border banking.

By: Pia Hüttl and Dirk Schoenmaker Topic: European Macroeconomics & Governance Date: February 4, 2016
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Policy Contribution

Should the ‘outs’ join the European banking union?

Should the ‘outs’ join the European banking union?

This paper analyses the banking linkages between the nine ‘outs’ and 19 ‘ins’ of the banking union. It finds that the out countries could profit from joining banking union, because it would provide a stable arrangement for managing financial stability.

By: Pia Hüttl and Dirk Schoenmaker Topic: European Macroeconomics & Governance Date: February 4, 2016
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Parliamentary Testimony

gwDutch Senate

Comments on the Five Presidents' Report

Presentation on the Five Presidents’ Report delivered at the Dutch Senate's Standing Committee for European Affairs, Finance and Economic Affairs on 8 December 2015.

By: Guntram B. Wolff Topic: Dutch Senate, Parliamentary Testimonies Date: December 9, 2015
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Opinion

Guntram B. Wolff

Europäische Einlagensicherung: Deutschland würde profitieren

Wer ernsthaft die Bankenunion will, kommt um die EU-weite Sicherung der Sparguthaben nicht herum. Es braucht Obergrenzen, wie viele Staatsanleihen Banken halten sollen.

By: Guntram B. Wolff Topic: Finance & Financial Regulation Date: November 25, 2015
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Past Event

Past Event

Economic governance of the EU: Quo Vadis?

This event will address topics of central interest in current EU policy debates: fiscal and competitiveness coordination, financial union and the divergent needs of member states inside and outside the euro area.

Speakers: Maria Abascal, Anna Ascani, John Berrigan, Michiel Bijlsma, Anne Bucher, Zsolt Darvas, Luc Denayer, Andreas Georgiou, Christopher Hartwell, Georg Ringe, André Sapir, Mikko Spolander, Wilfried Steinheuer, Massimo Suardi, Nicolas Véron, David Vines, António Vitorino and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: November 3, 2015
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Working Paper

Firmer foundations for a stronger European Banking Union

Firmer foundations for a stronger European Banking Union

The idea of Banking Union has been instrumental in arresting the euro sovereign crisis. However the long-term rationale behind Banking Union is related to cross-border banking in the Single Market. This paper argues that to complete Banking Union the lender-of-last-resort and deposit insurance functions should move to the euro-area level, breaking the sovereign-bank loop.

By: Dirk Schoenmaker Topic: European Macroeconomics & Governance Date: November 2, 2015
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Blog Post

Schoenmaker pic
Guntram B. Wolff

What options for European deposit insurance?

The aim of this blog post is to clarify different options of how to organize European deposit insurance without yet settling on the best option. We aim to explain and to highlight what different options can and cannot achieve. We end by drawing some tentative conclusions on potentially adequate quid-pro-quo measures for different forms of deposit insurances given the problem of transition.

By: Dirk Schoenmaker and Guntram B. Wolff Topic: Finance & Financial Regulation Date: October 8, 2015
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Opinion

Ashoka Mody
Guntram B. Wolff

Euro area banks remain vulnerable

Strengthening the banking system is important to achieve a sustainable recovery, because it will revitalise credit to the healthier segments of the economy. However without restructuring, euro area banks are still vulnerable.

By: Ashoka Mody and Guntram B. Wolff Topic: Finance & Financial Regulation Date: August 21, 2015
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Working Paper

The Vulnerability of Europe's Small and Medium-Sized Banks

The vulnerability of Europe's small and medium-sized banks

Stress tests show significant weaknesses in Europe's small and medium-sized banks. Strengthening the banking system is important to achieve a sustainable recovery because it will revitalise credit to the healthier segments of the economy. But instead of emphasising bank recapitalisation, we believe the task is to shrink the banking sector to a healthier core.

By: Ashoka Mody and Guntram B. Wolff Topic: Finance & Financial Regulation Date: July 15, 2015
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Blog Post

Guntram B. Wolff

Euro area governance: an assessment of the “five presidents” report

European Commission President Juncker has published the long-awaited report prepared in collaboration with the presidents of the European Council, the Eurogroup, the European Central Bank and the European Parliament. The aim of the report is to prepare a roadmap for the completion of EMU, which is “not an end in itself” but a “means to create a better life for all citizens”. The aim of this blog is to discuss a few of its key elements.

By: Guntram B. Wolff Topic: European Macroeconomics & Governance Date: June 24, 2015
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Essay / Lecture

Europe’s radical banking union

Europe’s radical banking union

Bruegel scholar Nicolas Véron argues in this thought-provoking essay that banking union ultimately enabled the European Central Bank’s announcement that it would buy large quantities of government bonds if needed and on the condition of a financial support programme.

By: Nicolas Véron Topic: European Macroeconomics & Governance, Finance & Financial Regulation Date: May 5, 2015
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