There will be no common European deposit insurance scheme for the " foreseeable future", Chancellor Angela Merkel said Thursday at German banking conference.
Her remarks are the most explicit yet from a German government official that one of the desired pillars for the European Union's proposed banking union won't be in place any time soon.
"The German government rejects a unified European deposit insurance--at least for the foreseeable future," said Ms. Merkel. "We prioritize, however, very clearly and vehemently," a harmonization of the European deposit system, she added.
Her comments come one day after the head of Germany's central bank told the same conference that at the current time a common insurance scheme was inappropriate.
Such a plan is "not sensible" because Europe's financial system isn't sufficiently integrated, said Jens Weidmann , head of the Bundesbank, Wednesday.
Many experts believe that for Europe to have a strong banking union to help break the sometimes dangerous links between banks and their sovereigns, there need to be three elements: a common supervisor, a common resolution authority and common deposit insurance.
But speaking in Brussels Thursday, a senior European Union official downplayed the need for all three parts to be implemented. "Each of the units of the banking union has merit in and of itself," said the official.
"Common funding mechanisms are also a big step forward but it's not a condition... without which the system wouldn't make sense. Having 17 [for the euro area] coordinated deposit guarantee schemes on a national level would be a good thing," added the official.
German leaders are often concerned about the large scale fiscal transfer the deposit insurance proposal could entail from Germany's relatively stable financial system to those in other European countries that are viewed as less secure.
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