The Heads of State and Government of the European Union have insisted this Friday on defending the solidity of European banks in a new day of sharp falls in the stock markets of entities such as Deutsche Bank, while they have asked not to lower their guard and resume the “efforts” to complete the Banking Union. The shares of the largest bank in Germany fell by almost 15% this Friday on the Frankfurt Stock Exchange, although they later stopped their collapse to 8.5%, after the increase registered in recent sessions in the cost of credit guarantee insurance against default (CDS).
In this context, the leaders wanted to send a message of calm at the euro summit that was held this Friday in Brussels, in which the president of the Eurogroup, Paschal Donohoe, also participated, who expressed his “confidence” in the banking system, and the president of the European Central Bank (ECB), Christine Lagarde, who has assured that, despite the solvency enjoyed by the banks, the institution is prepared to inject liquidity into the euro area if necessary .
“We remain committed to close coordination of our economic policies, with a view to increasing the resilience of our economies”, indicates the declaration of the meeting, in which the leaders have invited the Eurogroup to continue monitoring “closely” the economic evolution, in addition to call for intensified collective efforts to move the Capital Markets Union forward.
In the text they also point out that the Banking Union has “significantly” strengthened the resistance of the EU banking system, which is “resilient, with solid capital and liquidity positions”, for which they have urged that “efforts” continue to complete the Banking Union in line with the Eurogroup statement last summer.
They have also highlighted that the economic governance framework is a “key pillar” of the architecture of the Economic and Monetary Union, which supports the stability of the euro and the resilience of the euro area economy, for which reason they consider that an architecture A “strong” European financial system is essential to attract sustained investment, support innovation and job creation, and accelerate the green and digital transitions.
In his speech after the meeting, the President of the Government, Pedro Sánchez, welcomed the fact that Europe has learned and drawn lessons from the financial crisis, which he considers served to be “more prepared”, while also defending a Guarantee Fund that be “common” and that it go beyond national reforms and he has ensured that he has raised it to his peers, since he considers that this would avoid the “risk of fragmentation”.
For her part, the Prime Minister of Finland, Sanna Marin, has admitted that “of course, the situation varies”, but is confident of “getting ahead and moving forward”, while she has confirmed Lagarde’s message that the ECB will go ahead with the rise in interest rates: “It will continue as planned, there is nothing different on the horizon.”
The German Chancellor, Olaf Scholz, has also spoken out regarding Lagarde’s intervention, who has valued the “progress” of the ECB to combat inflation, although he has stressed that he does not want a price increase, at the same time that he has “applauded” that “for many years the correct decisions have been made to stabilize banks in Europe”.
Likewise, it has stressed that Deutsche Bank is a “profitable” entity that has “modernized its business model” so there is “no reason” to be concerned, despite the collapse on the Stock Market.
Deutsche Bank has spent years dragging a perception of weakness due to a combination of problems and scandals. In 2016, it was plagued by the subprime mortgage scandal and for years it had poor economic results. The bank undertook a reform plan that led the entity to earn just over 5,000 million euros, its best result in 15 years.
“The foundations of European banks are solid and we can celebrate the demands of the regulations on the matter”, stressed the French President, Emmanuel Macron, who stressed that the euro area has “learned from past crises” and has become the economic area where banks are “more solid” because it is where bank solvency and liquidity ratios have been followed “more scrupulously”.
This context has also influenced the need to accelerate the Banking and Capital Markets Union, to allow European companies a more “solid” base to finance their activities and have “better adapted” macroeconomic strategies.
Follow all the information of Five days in Facebook, Twitter and Linkedinor in our newsletter Five Day Agenda