Steinbrueck Slams Merkel for Putting Brakes on Banking Union

Chancellor Angela Merkel’s challenger in next year’s German election accused her of slowing progress on a European banking union and said the finance sector must take more of the cost of rescuing banks in the debt crisis.

Peer Steinbrueck, the former Social Democratic finance minister who was officially nominated this week to run for the chancellery in the September 2013 vote, said Merkel wasn’t following through on a June European Union summit decision to eventually allow bailout funds to recapitalize banks directly.

Merkel’s government “is going to come under enormous pressure” next year, Steinbrueck told reporters today in Berlin. Other European leaders “are sitting in their capitals and now realizing that the German government is being very restrained” about making progress on the banking union.

The German leader told lawmakers in her Christian Democratic-led bloc yesterday that no conclusive decisions will be made at this week’s EU summit in Brussels because more work needs to be done on improving competitiveness and working toward tighter fiscal controls. Finance Minister Wolfgang Schaeuble has said direct bank recapitalization won’t happen before an oversight mechanism is fully operational.

Steinbrueck also called for a harmonized deposit-insurance system, a 200 billion-euro ($261 billion) bank-rescue fund paid for by a bank levy and a debt-redemption fund that would pool sovereign debt.

Juergen Trittin, a leader of the opposition Green party, appeared alongside Steinbrueck at the briefing.

To contact the reporter on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net