German Chancellor Olaf Scholz told an EU summit on Friday that Europe’s banking system was “stable”.
The leaders of the euro zone countries are meeting with the head of the European Central Bank (ECB), Christine Lagarde, to discuss the possible consequences of the collapse of several large banks in the US and Switzerland.

Inflation, which has reached worrying levels following high government spending during the coronavirus pandemic, as well as the Russian invasion of Ukraine, is high on the agenda.

The ECB president was expected to say that banks in the eurozone – which includes 20 EU countries that share the euro currency – are safe. She is also expected to face questions over the ECB’s interest rate hikes, introduced to curb rising inflation.

What else did Scholz say?

Asked about the state of financial markets, Scholz said the EU has been making the right decisions for years by imposing clear rules.

“It’s worth having strict rules and regulations in recent years, the banking system is stable in Europe,” he said.

The chancellor said there was “no reason to worry” about Deutsche Bank.

“Deutsche Bank has modernized and organized its way of working. It is a very profitable bank. There is no reason for concern,” he said.

“Deutsche Bank has completely reorganized and modernized its business model and is a very profitable bank,” he said.

Scholz said that it is a joint task of the member states of the bloc to combat inflation.

What did other European officials say during the summit?

ECB chief Lagardet told EU leaders meeting in Brussels that the euro zone’s banking system was “resilient”.

“The euro zone banking sector is resilient because it has strong capital and liquidity positions,” Lagarde was quoted as saying by an official, according to Agence France-Presse news agency.

Eurogroup head and Irish finance minister Paschal Donohoe said he had “confidence in the liquidity and resilience that the banking system has built”.

“Thanks to the political decisions we have taken, we have the necessary reserves to guarantee the stability of our banking system,” he said.

Member states urged to take steps to establish a banking union. “Now we need to put into practice what we decided.”

“We don’t see any risks at the moment,” said Belgian Prime Minister Alexander de Croo. He said this was a result of the “very strict rules” the EU put in place after the big banking crisis in 2008 and 2009.

French President Emmanuel Macron said Europe’s banks had solid foundations and blamed “speculators” for the recent drop in bank values ​​on stock exchanges.

Why are eurozone leaders worried?

Concern over the collapse of Silicon Valley Bank and Signature Bank earlier this month only got worse as the impact rippled across the Atlantic, putting 167-year-old Swiss bank Credit Suisse at risk. The bank had to be rescued with a purchase by rival UBS.

The turmoil in the banking sector comes after years of cheap money were restricted by rising interest rates in the EU as well as the US.

Russia’s full-scale invasion of Ukraine and the subsequent cut off of gas supplies to Europe has sent energy prices soaring, hitting households and industry across the EU.

While inflation has slowly started to come under control and the bloc has avoided a technical recession, there are fears that a banking crisis could trigger a larger recession like the one seen after the 2008 banking crash.

ab,sdi/rc,nm (dpa, Reuters)