The European Banking Union?

A European banking union with joint liability cannot be put off much longer.

In June 2012, eurozone leaders announced their intention to establish a European banking union.

And, while European Union leaders have issued proposals for a banking and fiscal union, now Germany is pushing back.

The emerging banking union is not only the first step toward a European fiscal union it is also the final step toward completing the European common market.

In June 2012, eurozone leaders announced their intention to establish a European banking union. The euro, they said, had to be buttressed by transferring banking supervision to a European authority.

The price of the monetary union s survival, and thus that of the European project, is more community a banking union, fiscal union, and political union.

If the idea of a European banking union is serious, now is the moment to advance it.

Moreover, a full European banking union with shared resources for resolution should be created without further delay.

Its long term viability requires the development over time of a full banking union, fiscal union, economic union, and eventually political union. But the process of further European integration has stalled.

Europe s Bogus Banking Union

Europe s Flawed Banking Union

This requires implementing a fully fledged banking union with a pan European supervisor and a strong regime for banking resolution and deposit insurance as soon as possible.

Monetary union without banking union will not work, and a workable banking union requires at least some elements of fiscal and political union.

The proposed construction of a banking union reveals this fundamental flaw at the heart of the European project today.

A Banking Union Baby Step

The European Banking Disunion

Finally, political union means transferring the prerogatives of national legislatures to the European Parliament, which would then decide how to structure Europe s fiscal, banking, and monetary union.

Hollande, backed by Spain and Italy, accomplished a small step in that direction at June s European Union summit, which finally endorsed the idea of a banking union.

But the European Union collectively has roughly 30 of the votes at the IMF, and can effectively veto a more forceful approach to the European banking system.

The European Central Bank has been more thoughtful, though no less enthusiastic, arguing that a banking union should have three objectives.

A banking union, too, is needed.

Currently, the eurozone is on the threshold of a banking union, with a fiscal union to follow. But, even with only a banking union, the pressure toward political union will grow.

Monetary union without banking, fiscal, and political union has been a disaster.

The European banking system must be turned into a banking union with the ECB responsible for prudential supervision. The fiscal compact must be implemented quickly, and progress on harmonizing fiscal policies should continue.

The eurozone needs a banking union a European deposit insurance scheme in order to stem capital flight, a European source for financing bank recapitalization, and eurozone wide supervision and regulation.

A crucial element of restoring confidence in Europe is agreement on a roadmap for the eurozone to underpin its monetary union with a fiscal union and a banking union, including pan European supervision and deposit insurance.

It has defined the agenda for years to come banking union, fiscal union, and political union.

3. Map a scheme for a banking union.

The opposite of the renationalization scenario is complete integration of eurozone financial markets. Officially, this is the aim of establishing a European banking union.

CHICAGO Overcoming the European Union s current economic malaise, as almost everyone acknowledges, requires deeper integration, with the first step taking the form of a banking union supervised by the European Central Bank.

But, even with only a banking union, the pressure toward political union will grow.

As a result, important projects like establishing a European banking union, which would require a fiscal backstop, are likely to be delayed or even endangered.

National banking systems should be unified, in order to separate private losses from sovereign debt, with centralized supervision and resolution authorities, as well as a deposit insurance scheme, forming the core of a European banking union.

European Union

European Union

European Union

But the difficult negotiations that led to the agreement eclipsed European Council President Herman Van Rompuy s recent report, Towards a Genuine Economic and Monetary Union, which calls for unity far beyond a banking union.

Merkel insists that a political union should precede a full fledged fiscal and banking union.

The second unresolved question is how to achieve a banking union in legal terms. Constitutional change on this scale would normally require a new European treaty.

The eurozone s difficulties, I have long argued, stem from European financial and monetary integration having gotten too far ahead of actual political, fiscal, and banking union.

2004 Funding was secured for the RapidEye satellite constellation and ground segment with the help of the European Union, the State of Brandenburg (Germany), a banking consortium consisting of Commerzbank, EDC (Export Development Canada) and KfW Banking Group.

But Europe s policymakers claim to be making progress toward a so called banking union, which means collective banking supervision, rather than a merger of banks themselves. In September, the European Commission announced a plan to make the European Central Bank the supervisor of all 6,000 of Europe s banks.

Europe needs no banking union beyond a common regulatory system.

This heightened uncertainty could spill over to economic activity in the rest of the European Union through adverse feedback loops between sovereign risk and the banking system.