Advocacy coalitions and the lack of deposit insurance in Banking Union

This paper shows that advocacy coalitions surrounding the establishment of a European Deposit Insurance System lead to spillovers into incompatible areas. Alternative spillovers were to increased public backstops and state aid. Intent to minimize costs, Germany and the Netherlands have pushed for wide-ranging risk reduction measures: that go to the core of financial practices in southern Europe, while Italy has pushed for greater public backstops and state aid within EMU. Unable to break the deadlock in Council, the EU awaits Basel Committee guidance on how to deal with sovereign risk exposures in its 2017–2018 work program.