Euro zone needs to push on with banking, bailout reforms – Slovak finance minister

STRBSKE PLESO, Slovakia (Reuters) – Slovak Finance Minister Peter Kazimir said on Saturday the euro zone should speed up completion of a banking union and revamping a bailout fund as the window for reform is closing.

Kazimir has been mentioned as a potential candidate to replace Jeroen Dijsselbloem as head of the bloc’s finance ministers’ group.

His remarks play into a larger debate about the future of the European Union’s single currency area, now comprising 19 countries.

French President Emmanuel Macron, elected in May, offered an ambitious vision last month for European renewal as a counterweight to the impact of Britain’s exit from the EU in 2019.

Ideas that have been floated include a special euro zone budget, a treasury and a finance minister, turning the euro zone’s ESM bailout fund into a European Monetary Fund and possibly some form of jointly issued debt.

In a speech at the Globsec Tatra Summit conference on Saturday, Kazimir urged the euro zone to squeeze the maximum out of the current momentum while the bloc waits for a government to be formed in European powerhouse Germany.

“We have created expectation and thanks to favourable political winds a window of opportunity has opened for us. This window, however, has started to close,” he said, referring to the process of coalition-building in Germany.

“My humble suggestion would be to … harvest low-hanging fruits: complete the banking union tomorrow, transform the European Stability Mechanism and keep drawing Europe’s future architecture – institutions, rules, carrots and sticks.”

EU leaders agreed last week they would kick off the discussion on the reform of the euro zone and completing their banking union at a euro summit in the middle of December.

To complete the banking union, leaders need to agree that the euro zone bailout fund is the financial backstop for the a single resolution fund for banks, in case it runs out of money.

But the key element still missing – a pan-European scheme to protect deposits – is likely to be more difficult because Germany is strongly against it.

Kazimir said his vision for a complete, prosperous and stable euro zone includes a complete banking union and a working capital markets union.

He also suggested building a fiscal capacity, another word for euro zone budget, to compensate the loss of national monetary policy with a shield against asymmetric shocks, and introducing a no-bailout rule and sovereign debt restructuring.

The euro zone needs to make its fiscal rules simpler and more predictable, he said.

(Reporting by Tatiana Jancarikova; Editing by Alison Williams)