After 14 years leading Germany, Angela Merkel will not seek another term as chancellor. Before she hands over the reins in 2021, it appears she might use some of her remaining political capital to steward the creation of an EU banking union, historically an unpopular idea in Germany. But Predata signals show that the internet’s initial reaction to a proposal from Merkel’s finance minister may bode well for such a union’s prospects — though other signals related to the political transition suggest the path may be rocky.
Last week, German Finance Minister Olaf Scholz proposed plans for a common EU bank deposit reinsurance arrangement that would create an EU banking union. The proposal was a bold one for Germany. As the eurozone’s largest and perhaps most stable economy, it has bridled at sharing bank risk with peripheral nations. Though a banking union may increase Germany’s exposure, the lack of such a comprehensive union is a major vulnerability to the long-term viability of the eurozone.
As perhaps one sign that conditions have been ripening for a serious banking union push, online attention to the issue has been rising steadily since August. Activity on web pages in several European languages — German and Italian, principally — has driven the signal.
When Scholz announced the proposal last week, it landed with a bang. Online interest in the German economy surged to its highest level of the year, driven primarily by scrutiny of web pages related to the country’s fiscal policy. This heightened interest in the German economy is a sign that online observers are taking the proposals seriously and considering what greater integration will mean for Europe’s leading economy.
Concurrently, online interest rose in Germany’s banks. As we wrote in a client note last week, a common EU banking union could have significant upside for German banks, opening up opportunities for consolidations and mergers.
Though Merkel may push for greater integration, the continuation of that work will fall to her successor. Chairwoman of Merkel’s Christian Democratic Union (CDU) Annegret Kramp-Karrenbauer is the leading candidate to succeed Merkel and would likely carry on her policy agenda. Recent polling, however, has suggested that the CDU’s senior leadership are doubting whether she is the best option to replace Merkel. Other challengers are gaining traction; for instance, online interest surged in Friedrich Merz, a conservative who would likely push the CDU to the right on economic policy.
The CDU will hold a party congress November 22 in Leipzig. An open power struggle and uncertain transition could draw attention away from the banking union and weaken the prospects of its success.