European Union countries aren’t likely to make much progress in setting up a banking union until after German parliamentary elections in September, Maltese Prime Minister Joseph Muscat said.
“The EU is in the waiting room until the vote,” Muscat said in an interview in Rome today. While details need to be ironed out, Muscat says he believes there is a “willingness” among his counterparts for the union to be created. “On our part, we don’t want too much ex-ante coordination for example, but we favor the union.”
European leaders have mandated the European Central Bank with supervising financial institutions and committed in late June to reach agreement on a single resolution mechanism by the end of the year. Germany has expressed concerns about the use of taxpayers’ money and said the plan may conflict with the EU’s basic laws by taking away national control over finances.
While decision making in the EU system isn’t quick, leaders are moving forward, he said. Muscat also acknowledged the work of the ECB, saying it has effectively defended the euro and been “a bulwark of stability.”
Responding to concerns by the International Monetary Fund that Maltese banks are heavily exposed to the local property market, the premier said that financial institutions are “properly capitalized and conform to all the rules.”
“The banking system in Malta is not a problem,” he said, adding that the IMF report praised the country’s growth and resilience, thus “dispelling any Cyprus-like rumors.”
While the Mediterranean island nation has one of the highest growth and lowest unemployment rates in the euro area, its fiscal position deteriorated last year, when the deficit rose to 3.3 percent of gross domestic product. Muscat’s government, which took office in March, has promised to reach its deficit target of 2.7 percent by year-end.
The economy expanded 0.8 percent in 2012 and unemployment averaged 6.3 percent.