EU must complete banking union, establish capital markets union: Eurogroup

Economic growth is not an end in and of itself, but is crucial if Europe is to retain its unique and inclusive socio-economic model, said Eurogroup president Jeroen Dijsselbloem on Wednesday at the Tatra Summit here to discuss the future of Europe's economic and monetary union.

"We must structurally reform our economies to improve productivity and bring about sustainable long-term growth in order to achieve full employment and maintain the European social model," said Dijsselbloem, adding that important next steps are the completion of a banking union and establishing a real capital markets union.

"There is a clear trade-off between a banking union and a capital markets union on the one hand and the need for a fiscal capacity on the other. I strongly believe shock absorption through a strong and well-functioning banking union and a capital markets union is preferred over additional budgetary means. I believe strongly in private risk buffering over public risk buffering," stressed the Eurogroup president.

According to Dijsselbloem, the key element in building the banking union was the paradigm-shift from bail-out to bail-in, from public to private risks.

"Completing the banking union, by agreeing on a common backstop and by launching a European deposit guarantee system is about sharing risks. I believe it's even more important to diminish risks. Only then, will we have a sustainable banking union which absorbs shocks throughout the eurozone," explained Dijsselbloem, adding that the EU needed stronger and much more integrated capital markets.

"Well-functioning capital markets will strengthen cross-border risk sharing through the deeper integration of bond and equity markets. It opens up a wider range of funding sources for our economy and it is therefore a key shock absorber of a kind we currently lack," concluded Dijsselbloem. Endit