- The key to stabilizing the Eurozone is to sever the “doom loop” that links weak banks and governments and leads them to drag one another down. Only a completed banking union can do that. A true banking union must combine common supervision of banks, a common mechanism for the resolution of failed banks and common deposit insurance.
According to the bio, Kelemen is a Professor of Political Science and Jean Monnet Chair in European Union Politics at Rutgers University. Therefore, I assume that he is well-versed in European politics and history. However, I can't see how a banking union can be achieved without a fiscal union, as they are pretty much one and the same as described here, and I cannot imagine that Europe is ready for that. Fiscal union basically means a United States of Europe.The key to stabilizing the Eurozone is to sever the “doom loop” that links weak banks and governments and leads them to drag one another down. Only a completed banking union can do that. A true banking union must combine common supervision of banks, a common mechanism for the resolution of failed banks and common deposit insurance.
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German Chancellor Angela Merkel and other leaders of stable Eurozone countries have long opposed a stronger banking union that would include features such as common deposit insurance; they fear will put their taxpayers on the hook to bail out failed banks on the Eurozone’s periphery. But the latest chapter in the Greek crisis should serve as a reminder that the costs of the absence of a banking union are likely far higher than the costs of constructing one.
The tin foil hat part of me, having read about how it was the bank's deliberate mishandling of the situation that led to the current crisis, wonders if the entire event was engineered to further strengthen the banks' positions and create what the moneyed puppet masters wanted all along.