Europe's Chance to Get Deposit Insurance Right

The European Commission recently presented its proposals for European bank deposit insurance. Officials hope to stabilize the banking system and decouple bank financing costs from any solvency issues affecting their host states. This would achieve the original aim of a proposed banking union by breaking the link between states and their banking systems.

But the proposals have been met with fierce resistance. It's often been a popular assessment that taxpayers in Northern Europe would have to pay for "rotten" banks in the European Union's South. German critics in particular have called the proposal an "attack on German savings" while pointing to high levels of public debt on the books among banks in Southern Europe. They also worry about high levels of non-performing loans.