Gaston Reinesch: Beyond the horizon of the Luxembourg presidency - a
central banker's perspective
Speech by Mr Gaston Reinesch, Governor of the Central Bank of Luxembourg, at the
National Bank of Poland's Biannual EU Presidency Lecture, Warsaw, 27 October 2015.
* * *
Ladies and Gentlemen,
Dear Marek,
At the outset, I would like to extend my sincere gratitude to the National Bank of Poland and
in particular to Governor Belka for inviting me to give the National Bank of Poland's Biannual
Presidency Lecture, which has already earned an excellent reputation and become a
wellestablished tradition. It allows to take stock of ongoing developments in the European Union
(EU) and to ponder how it could evolve in the future. I am very pleased to be given the
opportunity to address such a distinguished audience here in Warsaw today.
I. Introduction
Ladies and Gentlemen,
His Royal Highness, the Grand-Duc of Luxembourg, during his state visit to Poland in May
last year, introduced his speech on the occasion of the dinner offered by the President of the
Republic of Poland by stating that he was touched by an invitation to Poland's Public Radio
to pay tribute to Radio Luxembourg, formerly called "Luxy" by the Polish people, and that he
particularly appreciated the symbolism of this gesture.
He stressed that existing ties between nations may not necessarily be material but very often
had immaterial aspects. The fact that the Grand-Duchy of Luxembourg became associated
with values of liberty and a certain "joie de vivre" by the Polish people was for him a source
of pride.
Such reminiscence living in the memories and in the heart of people is priceless.
The paths of our two countries did not often cross directly, but we certainly have something
in common, notwithstanding our different size and history. To some extent, we share a
similar past in the sense that given our geographically strategic location, we too, in a more
remote past, have been the target of neighbouring countries that had expansionary
ambitions. But our two countries have succeeded in overcoming the greatest challenges,
including historical tragedy.
The ties between Luxembourg and Poland have strengthened over time. Today, about
5,000 Polish citizens contribute to Luxembourg's multicultural landscape. I am also very glad
to say that I recently appointed a Polish national who will soon join our legal department. The
Central Bank of Luxembourg's staff is representing 20 different citizenships and more than
50% of its staff do not have Luxembourg citizenship.
Poland is a large country, but above all, it is a great one. It is a proud country and rightly so.
Last year was a year of commemoration and celebration of several important events. You
commemorated the 70th anniversary of the Warsaw Uprising. You celebrated the 15th
anniversary of NATO membership, the 25th anniversary of Polish freedom and the
emergence of a fully sovereign Poland, a solid parliamentary democracy and a dynamic
social market economy, with an overall remarkable macroeconomic performance.
Last but not least, and this brings me to our topic of today, last year you also celebrated the
10th anniversary of Poland's accession to the EU. The fact that the current President of the
European Council, Donald Tusk, is a Polish national and the President of the European
Commission, Jean-Claude Juncker, is a Luxembourg national, might be considered a
coincidence of European history. At any rate, it fills our two countries with a certain pride.
Allow me at this point of my speech a brief digression to share with you a few memories of
my last visit to Poland, which unfortunately dates back to as far as 2001. I accompanied the
then Luxembourg Prime Minister Jean-Claude Juncker on a state visit. I have fond memories
of that visit, not only of the ceremony at the Tomb of the Unknown Soldier and of the very
interesting formal discussions, which included an important European component, but also of
a delightful lunch hosted by a Polish peasant family at their farm house in Lublin Province.
Lunch was followed by a no less emotional visit to a primary and middle school, during which
pupils who welcomed us very warmly showed a particular interest in the EU enlargement
process and the expected accession of Poland to the EU. Throughout our stay, we were
impressed by the courage and determination of the Polish people and by their eagerness to
join the EU.
If anything, this experience strengthened my conviction that one of the basic tenets of the
European construction is unity in diversity. It is my firm belief that the enhancement and
deepening of unity has to go hand in hand with a good understanding of every current and
future member State's characteristics and specificities, in all their dimensions, notably
political, economic, and cultural.
To be successful, Europe must continue to be perceived by its citizens as an enriching
project, economically, socially and politically, a community of basic common values in which
people can prosper in peace. Without a continued broad acceptance by European citizens of
the European project, the necessary future steps of integration will prove difficult, if not
impossible.
In this spirit and before I get to the core of my speech, allow me to say some words about
Luxembourg. After all, I just stressed the need to understand our respective historic,
economic and political backgrounds.
Most of you know of Luxembourg as a financial centre, which emerged some fifty years ago.
But I presume that most of you only have a vague idea of the economic development of the
Grand-Duchy of Luxembourg since its independence in 1839 and up to the middle of the
20th century. So allow me to take a longer historical perspective to give you a very succinct
overview of its economic development since the middle of the 19th century, an economic
development, which from the middle of the 20th century, was closely co-determined by the
European integration process.
Around 1850, Luxembourg was one of the poorest regions in Europe, an unproductive
agricultural economy. The Luxembourg economy then experienced a takeoff, which can be
described by using, on the one hand, the traditional economic concepts of supply and
demand and, on the other hand, the concept of economic integration.
On the supply side, it all started with the geological discovery of a natural resource in the
south of the country, namely iron ore. While the phosphorus content of the iron ore was too
high to allow for the production of quality pig iron, this problem was solved by the
technological import of an innovation by a British engineer, the Thomas Gilchrist process, a
perfect example of cross-border technical dissemination in the 19th century.
As far as labour was concerned, labour supply was relatively elastic and this for two reasons.
First, there was immigration of both a qualified labour force, such as engineers, and less
qualified workers coming mainly, but not exclusively, from neighbouring countries. Second,
domestic migration from the poor agricultural North to the South took place. Thus, farmers
were leaving agricultural businesses to become predominantly, in the first instance, miners.
Later on, through learning by doing and educational efforts, the average level of qualification
of Luxembourg nationals and of the descendants of immigrants increased. Hence,
Luxembourg nationals also gradually became engineers, accountants, managers etc. Let me
also mention that most of the descendants of first generation immigrants acquired
Luxembourg nationality. This explains why so many Luxembourgers have for example Italian
family names or even Polish ones, given the immigration of Polish citizens to Luxembourg,
particularly in the interwar period.
Furthermore, the scoriae, a fallout or byproduct of the Thomas Gilchrist process, provided an
excellent fertilizer for the poor agricultural soil. Thus, the industrial steel revolution boosted
productivity in the agricultural sector. The large industrial investments that were needed were
financed with capital that mainly came from Belgium and Germany.
There was also an institutional or sovereign dimension in the sense that a law voted by
Parliament conditioned the granting of concessions of iron ore exploitation to an obligation of
on-site transformation of iron ore to a final product, thus laying the foundations for the
development of a value added chain on Luxembourg territory.
On the demand side, there was no significant demand in Luxembourg for the products of the
steel industry, which, moreover, was characterized by economies of scale. However, at that
time, Luxembourg was a member of the Zollverein, a German customs union. The Zollverein
offered a large free-trade area for steel made in Luxembourg and facilitated the supply of
coal, a key input to steel production. Without such economic integration, the steel industry
would not have been at the origin of the economic upswing and, later on, the engine of
growth of the Luxembourg economy, and this for more than a century. As a Luxembourg
economist1 once said: "Just as Egypt is a gift of the Nile, Luxembourg is a gift of iron".
Some fifty years ago, in the 1960s, the steel industry, directly or indirectly, accounted for
nearly 50% of Luxembourg's GDP; it was the most important employer and constituted the
key source of tax revenue for the Luxembourg State. But, as history consistently shows,
there is no sustained growth without structural change and without shocks.
In the aftermath of the 1974 oil shock, the steel industry throughout Europe suffered a
structural crisis of unprecedented magnitude. Luxembourg, depending very much on the
exports of steel, was very seriously impacted. It was confronted with an economic crisis of
national dimension with tremendous potential consequences in macroeconomic terms, and
which could have entailed the country's downfall.
But, around that time, an exceptional and lucky historical coincidence occurred in a country
that in the 1960s only had around half a dozen commercial banks, a number that was largely
sufficient to cover the needs of the small domestic market. When the steel industry declined,
Luxembourg experienced the birth and development of a financial centre, without there being
any direct causal relationship between the decline of the steel production and the expansion
of financial services. The initial development and the expansion of the financial sector had
multiple causes and most of these were of an external origin.
This said, let me take a step backwards to the period after World War I. After World War I,
the German Zollverein was dissolved and Luxembourg had to look for a new economic
partnership. In a referendum organized in 1919, a large majority of the Luxembourg
population expressed a preference to enter into an economic union with France. However,
such an interest was not reciprocal and Luxembourg finally turned to Belgium, which led to
the establishment of the Belgo-Luxembourg Economic Union. The economic union, mainly
based on a customs union, became effective in 1922. It included elements of monetary
cooperation, which led to the establishment of a monetary association between Belgium and
Luxembourg in 1935. The monetary association was highly asymmetric. Luxembourg was
not granted a central bank and was not directly involved in monetary policy decisions. In a
nutshell, it had no monetary sovereignty.
With the introduction of the euro, the monetary association was dissolved. As requested by
the Maastricht Treaty, Luxembourg established a national central bank in June 1998, before
the introduction of the euro.
This very succinct overview shows that economic and political integration have throughout
Luxembourg's history been a key factor for the development of the Luxembourg economy, a
very small open economy, which is export-led and partly import-driven.
I mentioned the Zollverein, followed by the creation of the Belgo-Luxembourg Economic
Union2 and monetary association. That process was followed by European integration,
starting with the European Coal and Steel Community (ECSC), and followed later by the
creation of the European Economic Union and the European Union. The symbiotic
relationship with Europe has served the country well and the pro-European public opinion in
Luxembourg towards Europe has remained unscathed despite the challenges the country,
the European Union, and, more specifically and recently, the euro area have been facing
over the years, especially the global financial crisis that started unfolding some eight years
ago.
This brings me to the Luxembourg Presidency's programme, which is ambitious and based
on seven pillars:
- Stimulating investment to boost growth and employment,
- Deepening the European Union's social dimension,
- Managing migration, combining freedom, justice and security,
- Revitalising the single market by focusing on its digital dimension,
- Placing European competitiveness in a global and transparent framework,
- Promoting sustainable development,
- Strengthening the EU's presence on the global stage.
I hope you do not expect me to cover all these items. Besides, since an EU Presidency is a
government-driven process, and since central banks are independent off political processes,
I will try to confine my remarks to topics that are of a more direct interest to central banks. I
will also seize this opportunity to share a few personal thoughts on how the EMU's
governance could be further improved over the years.
These reflections will be structured in two parts.
In the first part, I will briefly highlight the ongoing challenges for the single monetary policy,
and touch upon the macroeconomic outlook for the euro area.
I will then take stock of key measures that have been taken to strengthen European
economic governance, and point out some possible improvements and avenues that could
be explored to further enhance the EMU's framework over the medium term, before
concluding.
II. The global financial crisis and ongoing challenges from a monetary policy
perspective
The global financial crisis that started to unfold in 2007, by any historical standard, gave rise
to very challenging economic and financial conditions. Between 2007 and 2013, facing
elevated pressures in several financial market segments as well as contracting economic
activity, the ECB's Governing Council adopted forceful and timely standard and non-standard
measures. Against the backdrop of the wealth of the Eurosystem measures taken in
response to the financial crisis, I will focus on the current euro area challenges from a
monetary policy perspective and the measures taken by the Eurosystem since 2014.
An overview of the measures taken in response to the financial crisis covering, among
others, liquidity management actions, changes to the collateral framework, supplementary
longer-term refinancing operations, asset purchase programmes, and forward guidance, will
be included as an annexe to the written version of this speech.
Importantly, it is because of the forceful measures taken between 2007 and 2013 that the
ECB's Governing Council consistently provided an anchor of stability and confidence
throughout the financial and sovereign debt crisis.
As a matter of fact, despite the severe tensions during the financial and sovereign debt crisis
and the resulting volatility in economic activity and headline inflation3 inflation expectations
remained firmly anchored at levels consistent with the Governing Council's aim of keeping
inflation rates below, but close to, 2% over the medium term.
Throughout 2014, however, additional contingencies materialized, with risks extending to a
worsening of the medium-term outlook for inflation and a loosening in the anchoring of
inflation expectations. While standing at elevated levels above 2% in 2011 and 2012, annual
HICP inflation declined throughout 20134 and - in a context of already low inflationary
pressures - continued its downward trend in 2014.
Moreover, survey and market-based inflation expectations reacted to low actual inflation.
While the impact focused on short-term inflation expectations, from mid-2014 medium to
long-term inflation expectations also tended to decline.
The risk of inflation remaining low for too long a period of time thus became a key concern.
In the course of 2014, therefore, the Governing Council lowered key policy interest rates
further and introduced a negative interest rate on the deposit facility in June 2014 (-0.1%,
further lowered to -0.2% in September 2014). Since September 2014, the main refinancing
rate stands at 0.05%.
With key policy interest rates in the vicinity of a lower bound, the Governing Council adopted
further non-standard monetary policy measures in 2014, not only in order to address
impairments in the transmission of monetary policy, but also with a view to initiating a
monetary accommodation beyond what could be achieved through reductions in policy
interest rates, thereby supporting the anchoring of medium to longer-term inflation
expectations in line with the Governing Council's price stability objective.
In June 2014, the Governing Council announced a series of targeted longer-term refinancing
operations (so-called "TLTROs"). TLTROs provide long-term funding over a period of up to
4 years. The exact borrowing terms depend on the volume of a borrower's lending to the real
economy (relative to a benchmark that is specific to each credit institution). By combining low
long-term refinancing rates and positive incentives to lend, TLTROs aim at enhancing loan
supply and lowering lending rates. Unlike the longer-term refinancing operations introduced
earlier in response to the financial crisis, TLTROs are specifically designed to provide
incentives for lending to the real economy, one of the key factors holding back the recovery.
Then, in September 2014, the Governing Council announced an asset-backed securities
purchase programme ("ABSPP") and a new covered bond purchase programme ("CBPP3").
The Governing Council stated that it expected these two asset purchase programmes to last
for at least two years. Both programmes are tailored to the financial structure of the euro
area economy. The covered bond market represents a primary source of financing for euro
area banks and the link to the underlying loans is fairly close. ABS interest rate spreads, too,
are closely linked to the lending rates banks apply on the underlying loans.
Therefore, both purchase programmes complement the TLTROs in strengthening the
transmission of monetary policy to the borrowing conditions of the non-financial private
sector in the euro area and in supporting credit conditions for businesses and households in
the euro area.
At the end of 2014, the Governing Council communicated its intention to increase the
Eurosystem's balance sheet towards the level that existed at the beginning of 2012 in order
to provide a sufficient degree of monetary stimulus to raise the inflation rate to levels below,
but close to, 2%.
Thus, in early 2015, it conducted a thorough reassessment of the outlook for price
developments and of the monetary stimulus achieved. Back then, it concluded that the
medium-term inflation outlook had weakened. While the monetary policy measures adopted
since June 2014 permitted a satisfactory pass-through of the liquidity injected to private
sector borrowing costs, the prevailing degree of monetary accommodation was not sufficient
to adequately address heightened risks of too prolonged a period of low inflation.
Against this background, the Governing Council decided to expand asset purchases to
encompass euro-denominated investment grade securities issued by euro area governments
as well as agencies and European institutions (the so-called Public Sector Purchase
Programme, "PSPP"). The combined monthly purchases of public and private sector assets
under all three pillars, together called the Expanded Asset Purchase Programme (i.e. the
ABSPP, the CBPP3 and the PSPP), amount to €60 billion. They are intended to run until the
end of September 2016, or beyond if necessary, and, in any case, until we see a sustained
adjustment in the path of inflation that is consistent with our aim of achieving inflation rates
below, but close to, 2% over the medium term.
Given the various channels through which each of the monetary policy measures taken since
June 2014 operate, and due to the well-known lags of monetary transmission and the
uncertainty with regard to the counterfactual, it is too early, at the current juncture, for a final
assessment of the final impacts of these measures.
There is, however, ample evidence that the monetary policy measures in place since June
2014 have been conducive to an easing in borrowing conditions and have supported credit
flows in the euro area. Since last year, interest rates for bank loans declined by much more
than the concomitant reduction in policy rates.5
In the October 2015 Bank Lending Survey, euro area banks reported a stronger than
expected net easing of credit standards on loans to businesses in the third quarter of 2015.
Moreover, net demand for loans to businesses and for housing loans strengthened.
Regarding euro area banks' access to retail and wholesale funding, the October 2015 Bank
Lending Survey suggests improved access to funding for all main market instruments (retail
deposit funding, however, deteriorated slightly). Banks continue to report that the additional
liquidity generated by the expanded asset purchase programme is being used for lending.
Finally, banks report that the expanded asset purchase programme has had a net easing
impact on credit standards, in particular for loans to businesses.
With regard now to inflation and growth, the September 2015 ECB staff macroeconomic
projections show a more mixed result. They indicate a continued, though somewhat weaker,
recovery and a slower increase in inflation rates compared with earlier projections.6 More
recently, renewed downside risks have emerged to the outlook for growth and inflation. At
the same time, the 2015Q3 and the 2015Q4 Surveys of professional forecasters7 suggest
that the 2014/2015 package of measures led to a stabilisation of longer-term inflation
expectations.
It is important to underline that these projections on inflation and on output are based on, and
are conditional on, a full implementation of the Expanded Asset Purchase Programme
announced in January and on the full implementation of the credit easing measures decided
in the course of 2014. This monetary policy stance is considered essential for a continued
recovery and a convergence of inflation towards our price stability objective. It has to be
stressed that these projections were also based on a set of technical assumptions (e.g. in
relation to international factors, including exchange rates, oil price, and commodity prices).
To the extent that these factors could change, and could possibly worsen, thereby entailing
increased downside risks, the current monetary policy stance would have to be revisited.
In light of the renewed risks that have emerged on the back of recent developments in global
economic, financial and currency markets, the Governing Council will continue to monitor
very closely the risks to the outlook for price developments over the medium term. It is ready
to use all the instruments available in its mandate to act, if so warranted.
While our monetary policy measures have contributed to the euro area recovery and to a
gradual improvement in the inflation outlook for price stability, monetary policy is not a
panacea and not the only game in town.
Our measures should be supported by action in other policy domains to support economic
recovery and to ensure debt sustainability. Let me mention two of them: structural reforms
and fiscal policy.
First, a continuation of structural reforms is necessary and they should be seen beyond the
confines of national economies. They could, inter alia, increase the growth potential of the
euro area and make it more resistant to shocks. In this context, one should keep in mind that
already before the crisis the level of unemployment was too high and the growth of potential
output too low. One of the most important economic challenges, next to a greater economic
convergence, is an increase in potential growth with an increase in productivity; this should
also be seen against the background of demographic challenges. I have elaborated on this
point in a speech I recently gave at the EurofiFinancial Forum.
Second, while having to stay fully compliant with the EU fiscal rules of the Stability and
Growth Pact, fiscal policy can also contribute to supporting the economic recovery,
particularly through growth-enhancing public investments, material and immaterial, which
have a demand and a supply effect. It also seems that in some countries, including
Luxembourg, there is scope for tax reforms that could both enhance efficiency and reduce
inequality, while being revenue neutral.
Furthermore, against the background of weak investment, the Investment Plan for Europe
- also referred to as Juncker Plan -, is a welcome initiative and a priority of the Luxembourg
Presidency. It aims to unlock additional investment of at least €315 billion over the next three
years by addressing market gaps and by mobilising private capital. Beyond the immediate
objective to boost investment, the Investment Plan for Europe strives to improve long-term
competitiveness, human capital and physical infrastructure.
Let me now come to the governance of the Economic and Monetary Union (EMU).
III. EMU governance: progress achieved and room for further improvement
The Economic and Monetary Union (EMU) involves the coordination of economic and fiscal
policies, a single monetary policy and a single currency, the euro. While the single monetary
policy and the single currency were established with the inception of the euro ("monetary
union"), the financial crisis revealed a clear need for a strengthening of the coordination of
economic and fiscal policies (the "economic pillar" of the union). And, indeed, we have
witnessed significant progress, notably with regard to the Economic and Governance
framework, the Banking Union, the strengthening of the macro-prudential framework, and the
establishment of financial backstops. I will touch briefly on those domains.
Economic and fiscal governance
Following the financial and sovereign debt crisis, a number of important initiatives were taken
with a view to avoiding unsustainable developments in individual countries that were
jeopardising the smooth functioning of the Economic and Monetary Union. The preventive
and corrective arms of the Stability and Growth Pact have been strengthened and
complemented by, among others, a macroeconomic monitoring exercise to address
macroeconomic imbalances ("Macroeconomic Imbalance Procedure") before they could
become systemic and spill over to other Member States.
The new rules introduced by a set of legislative initiatives, known as "Six Pack" [effective in
2011] and "Two Pack" [effective in 2013] and the Treaty on Stability, Coordination and
Governance in Economic and Monetary Union, with its Fiscal Compact [also effective in
2013], undoubtedly brought about important changes to the Stability and Growth Pact like the
operationalization of the debt rule, a stronger focus on expenditures, as well as automatic
correction mechanisms that are to be monitored and assessed by national bodies that have
to be independent. At the same time, the new framework allows for more flexibility,
depending in particular on a Member State's underlying budgetary position over the medium
term.
The new rules aim to better prevent deviations from set budgetary objectives and to enforce
potential sanctions more effectively. Under the current framework, surveillance has been
extended to macroeconomic policies through the Macroeconomic Imbalance Procedure and
can even be strengthened for euro area Member States with high fiscal deficits or public
debt, or facing challenges pertaining to financial stability. Annual assessments are conducted
in the context of the "European Semester".
However, despite the substantial progress that has been made so far, there is room for
further improvement, both in terms of form and substance.
First, the economic and fiscal governance framework has become very complex, to say the
least. Clarification and simplification of that framework could lower the risk of
misinterpretations and misperceptions.
Second, for a rule-based framework to be credible it is imperative to apply the rules
effectively. Recent reforms endowed the Stability and Growth Pact with some degree of
flexibility.8 However, when interpreted too widely, the flexibility of the Stability and Growth
Pact could increase risks related to debt sustainability.
The Banking Union
The Banking Union, based on three pillars (i.e. the Single Supervisory Mechanism (SSM),
the Single Resolution Mechanism (SRM) and the single Deposit Guarantee Scheme)
constitutes a major step in addressing some of the major weaknesses uncovered by the
crisis.
Since 4 November 2014, the ECB is at the helm of the Single Supervisory Mechanism
(SSM), which will help harmonize banking standards across the euro area and help reduce
the fragmentation, along national lines, of the banking landscape.
One might argue that the Banking Union is a corroboration of Jean Monnet's famous
statement, according to which "Europe will be forged in crisis and will be the sum of the
solutions adopted for those crises".9 Indeed, after the financial crisis and, even more, after
the sovereign debt crisis in the euro area, there was an acute awareness of the
incompleteness of the Economic and Monetary Union. All of a sudden, European integration
received a boost, this time with the inception of a banking union, which took shape very
rapidly. The work on the single rulebook started as early as 2009, and, by the end of 2013,
there was the Capital Requirement Regulation (CRR), the Capital Requirement Directive
(CRD IV) and the founding act of the SSM regulation.10
The establishment of the SSM, which has been a major undertaking, not only in terms of staff
and resources, was well managed by the ECB. In full separation between monetary policy
and banking supervision, it ensures independent banking supervision of the highest quality,
without interference of other, non-prudential, considerations. Significant progress also has
been achieved with regard to the establishment of a framework for the resolution and
restructuring of banks, the second pillar of the Banking Union.
The Single Resolution Mechanism (SRM), established by way of an EU Regulation that
entered into force in August 2014, introduces a European framework to ensure the orderly
resolution of banks covered by the SSM. Within this framework, a resolution procedure is
triggered by the ECB which, in its capacity as supervisor, expresses an opinion on a bank's
1st
solvency. The Single Resolution Board, which will be fully operational as from of January
2016, is at the core of the SRM. It is responsible for preparing and implementing the effective
resolution of insolvent banks, especially significant and cross-border banks, in cooperation
with the national resolution authorities.
The EU Bank Recovery and Resolution Directive (BRRD), adopted in May 2014, introduced
a single rulebook for the resolution of banks. With the transposition of this directive into the
national laws of the Member States, national authorities are endowed with the tools required
to restructure or unwind banks in a timely and orderly manner, minimizing the costs of bank
failures. Another fundamental measure introduced by the BRRD is the "bail-in" tool. In future
resolutions and restructurings of banks, shareholders and creditors will have to contribute to
the absorption of losses and capital recovery of the failed banks. In addition, banks
themselves will finance the national resolution funds introduced by the BRRD. From 2016,
the Single Resolution Fund, which will be built up over a period of eight years, will replace
these national funds in Member States participating in the SSM and the SRM.
Further progress is required in relation to the third pillar of the Banking Union, a single
Deposit Guarantee Scheme. Admittedly, a new EU Directive on deposit guarantee schemes,
which aims to address the current weaknesses by ensuring a uniform level of protection of
depositors throughout the European Union and to eliminate market distortions, was adopted
in April 2014. Nonetheless, an effective crisis management framework should include a
credible single deposit guarantee s