FRANKFURT (Reuters) - Political turmoil in Italy and Britain's decision to leave the European Union underscore the need for reforms in the bloc, a senior official of the German finance ministry said on Tuesday.
Italy's anti-establishment forces abandoned their efforts to form a coalition government on Sunday after President Sergio Mattarella vetoed their choice of a eurosceptic as economy minister.
Joerg Kukies, deputy finance minister with responsibility for financial market policy and European issues, said he didn't have much more to add beyond statements from Chancellor Angela Merkel on Italy.
"I would add that to me the current market volatility, together with Brexit, reinforces urgency of the EU27 to proceed with ... reforms," Kukies said at a financial conference.
Merkel said on Monday that she would work with any coalition government formed in Italy, but also warned that any discussions on economic policy would have to be within the rules governing the euro zone.
Kukies also poured cold water on initiatives to create a European deposit insurance scheme as part of a wider banking union.
The finance ministry views such a scheme as a longer-term project "given the high level of risks in the banking sector as of today", he said.
Proposals at the moment are unrealistic, he said, adding that reducing risk was the priority.
EU finance ministers last week reached an agreement on reforming bank capital rules, a major step towards boosting the bloc's financial stability and a stepping stone towards a deal on a backstop for its bank-rescue fund in June.
(Reporting by Tom Sims; Editing by Michael Nienaber and Richard Balmforth)