Explaining Germany’s Position on European Banking Union

Abstract

Much has been written about European banking union and Germany’s role in shaping it. Missing, however, is a comprehensive explanation for Germany's contradictory positions on banking union: German policymakers gambled on a single supervisory mechanism, and a single resolution mechanism yet drew the line on European-wide deposit insurance. We explain Germany’s mixed positions on banking union by drawing on prospect theory and theories of policy salience.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the authors.

ABOUT THE AUTHORS

Mark K. Cassell is professor of Political Science at Kent State University. He researches comparative public administration and Germany’s public banks. He is the author of the monograph How Governments Privatize: The Politics of Divestment in the United State and Germany (Georgetown University Press) and co-author of Mission Expansion in the Federal Home Loan Bank System (SUNY Press). His work also appears is the Journals Governance, Social Science Quarterly, and Public Administration Review.

Anna Hutcheson is a Doctoral student at Kent State University. She studies sexual and gender-based violence in the context of war, as well as the international justice mechanisms for these, and other, instances of political violence.

Notes

1 The ECON Committee is charged with debating and issuing recommendations to the European Parliament on proposals for each of the three pillars of banking union. In explaining Germany’s centrality to the process, the staff member pointed out that prior to 2015 the Rapporteur (Peter Simon) for the ECON and the shadow Rapporteurs for all the political groups except one were German.

2 The political risks for German policymakers is and remains considerable. Industry groups in Germany representing public banks and cooperatives initially opposed all three pillars of banking union. Leading German economists opposed banking union. And while the German public generally supports greater EU integration, the rise of political parties like Alternative für Deutschland (AfD) points to voter opposition to policies perceived to weaken Germany’s sovereignty. Economic risks are also significant. It is unclear whether the EBU significantly reduces the risk of another banking crisis. EU leaders note that without all three pillars in place, the stability of the system is at risk because some European banks are safer than others. And some EU economists question the efficacy of the resolution mechanism to prevent another global recession (Dermine, 2017).

3 See Mercer (2005).

4 Causal factors that affect perceptions of risk such as preferences or values of voters and policymakers is beyond the scope of this study and beyond the available data. Moreover, identifying why a voter or policymaker believes the status quo is acceptable or that a policy change is necessary may be important for studying bargaining. However, Vis and van Kersbergen's (2007) work suggests it is not necessary for a single country’s position on banking union.

5 Others have utilized German parliamentary debates as well in discussing legislative change. See Eising and Spohr (2017).

6 “Wie sicher sind unsere Spraguthaben?” Die Bild Zeitung 31 March 2013.

7 “Geld futsch – kann das auch bei uns passieren?” Die Bild Zeitung 26 March 2013.

8 Handelsblatt, ‘Die Deutschen verlieren das Vertrauen ins Sparbuch,’ Handelsblatt (2013).

9 Based on rankings from alex.com, which measures website popularity.

10 Interview conducted 10 October 2018.

11 Interview conducted 23 February 2017.