By Leigh Thomas
BUCHAREST (Reuters) – Mergers in Europe’s fragmented banking sector are necessary to make the sector more resilient as the euro zone seeks to protect itself from future crises, France’s finance minister told Reuters in an interview.
Bruno Le Maire, who joined President Emmanuel Macron’s centrist government in 2017 despite coming from the ranks of France’s conservative Republicans party, said banking sector consolidation was needed alongside a single regulatory supervisor and more integrated capital markets.
“I consider that today European banks are still too fragmented and we need banking consolidation,” Le Maire said in Bucharest, where he was attending a meeting of EU finance ministers.
Speaking with Reuters over dinner at an upmarket restaurant in the Romanian capital, Le Maire declined comment on specific deals. The biggest operation underway currently is a possible tie-up between German lenders Deutsche Bank and Commerzbank.
Despite persistent speculation, sometimes involving French banks, there have been few cross-border bank mergers in recent years in Europe, even though the European Central Bank has repeatedly urged consolidation, which it believes would ensure that credit flows to where it is needed most.
Le Maire, who has attended some of France’s most prestigious schools and held numerous senior posts in government, said the euro zone needed to finalise in coming months plans for a backstop for banks saddled with bad loans, and better integrate capital markets notably by agreeing to harmonise insolvency laws – a sensitive issue for some countries.
“If euro zone member states are not capable of taking certain steps forward in the coming months, we risk weakening the euro and seeing new fractures emerge in the euro zone,” Le Maire said.
Policymakers like IMF chief Christine Lagarde have warned that the euro zone’s financial sector remains dangerously exposed to shocks if it does not quickly complete reforms designed to keep risks contained.
Le Maire also wants the euro zone to quickly thrash out plans for a shared budget aimed at encouraging convergence among the euro zone’s economies. In particular, details on its governance and how it sits in relation to the broader EU budget remain to be hammered out.
“The euro zone will not survive growing economic divergences between member states. We have to equip ourselves with the instruments to reduce the divergences,” he said.
France, along with Germany, has championed the idea of a euro zone budget, but has had to scale down its ambitions in the face of resistance from the Dutch.
The Netherlands has rejected the idea that the budget has a capacity to help member states facing economic shocks, fearing this would mean transfers from richer to poorer countries.
With EU parliament elections due in May, the staunchly pro-Europe minister weighed into the debate about the future of the Union this week with a book warning that Europe must guarantee it does not fall behind China and the United States on technological progress, or risks being dominated by them.
Le Maire, who alongside Germany’s economy minister in February released an industrial policy manifesto calling for increased investment in technology research, revised antitrust and state aid rules and stronger defences against foreign takeovers, said EU state aid rules needed to be more flexible.
He said approval of aid for projects had to come much more quickly, otherwise companies would look beyond Europe to meet their needs. “Speed is of the essence … There are companies that need technology and they are going to get it where they find it.”
The minister has also called for an overhaul of antitrust rules after the European Commission blocked the planned merger of the rail businesses of Siemens and Alstom, seeing such tie-ups as necessary to build European champions.
“What do we want tomorrow for our telecommunications, our trains, our banks or our cars? I want that in all these fields we keep our European (industrial) capacities, which has to happen through consolidation.”
(Reporting by Leigh Thomas; Editing by David Holmes)