The Bank of Spain wants eurozone countries to complete their banking alliance by creating a deposit insurance scheme and a stabilization fund.
Reuters, citing the Bank of Spain, reported that during a presentation of its annual report, the central bank warned that the economy of the bloc could face risks as a result of Brexit uncertainty, high national debts, low productivity and a population that is getting older.
“It is necessary to complete (the) revision of the Economic and Monetary Union to avoid the single currency still being exposed to tensions in case of high-caliber disturbances,” said Bank of Spain Governor Pablo Hernandez de Cos.
In order for the European Deposit Insurance Scheme (EDIS) to be implemented, there must be a plan for a full eurozone banking union, which would help the financial sector better withstand shocks while also reducing the need for taxpayers bailouts.
Countries including Germany and the Netherlands are worried that if they agree to the EDIS, they would have to pay back the debt of struggling countries including Italy, Greece and Portugal, where banks are at risk of needing a bailout due to fallout from the sovereign debt crisis from 2010 to 2015, noted the report. To protect the bloc’s economy, a Bank of Spain source told Reuters that the banking union must be completed before another financial crisis or recession comes.
Spain’s Socialist Prime Minister Pedro Sanchez is trying to place Spain back into the mix when it comes to making decisions for the European Union. Its influence had waned during the past few years due to domestic issues. Sanchez wants the EU bloc to share a common budget, create an EU-wide unemployment fund and work on joint climate efforts. The leader is also calling for a European Investment Stabilization Fund to prevent any future financial crises.