Italy Is Ready to Make a Peace Offering on Europe’s Banking Push

(Bloomberg) -- Italy may be willing to compromise on its holdout against a German plan for further integration of the European Union’s banking system that includes setting limits on holdings of sovereign debt.

Vincenzo Amendola, Italy’s Minister for European Affairs, said in an interview in Rome on Friday that he is confidant that a “good compromise” can be found in the next month. He also said that Italy won’t delay a long-agreed reform of the EU’s bailout fund.

Under the plan tabled earlier this month, Germany would consider more cooperation on guaranteeing deposits in exchange for demands such as stricter rules on banks’ sovereign debt holdings. Italian Finance Minister Roberto Gualtieri has said the condition isn’t appropriate for the completion of the banking union.

“In negotiations, red lines are the starting point, then in the discussion you hope to find better compromises,” Amendola said. “We see some difficulties but I am optimistic.”

Europe’s banking union “urgently needs deepening” and Germany expects to see the first signs of progress by December in its push to speed up integration, according to Joerg Kukies, Scholz’s deputy. Work to create a common system of deposit insurance -- the third stage of banking union -- has been hindered by political disputes between EU members.

Read More: Germany Wants Progress on EU Banking Union Push By December

Euro-area finance ministers signed off on a legal text outlining changes to the European Stability Mechanism, the bloc’s bailout fund, in June. The reforms give the mechanism broader powers, including allowing it to serve as the lifeline for the currency bloc’s crisis fund for failing banks.

Despite pressure from the anti-establishment Five Star Movement, the biggest partner in Italy’s ruling coalition, the government won’t delay the plan’s progress at a December 12-13 summit of European Union leaders, Amendola said.

“The government judgment is that this treaty has new and positive elements like the fiscal backstop of 70 billion euros ($77 billion) for the resolution of possible issues linked to banks,” Amendola said.

To contact the reporters on this story: John Follain in Rome at jfollain2@bloomberg.net;Alessandro Speciale in Rome at aspeciale@bloomberg.net;Flavia Rotondi in Rome at rotondi@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, Natasha Doff, Andrew Davis

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