Europe's Deeply Flawed Banking Union
Half-measures won’t help regional lenders weather the next crisis
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Europe is putting the finishing touches on a banking union with the aim of restoring confidence in the euro area’s banks, reviving lending, and ensuring the common currency’s survival. It’s a step forward that doesn’t go nearly far enough.
In approving a raft of banking union legislation, the European Parliament has ratified an important understanding: If the member states of the euro area want to share a currency, they’ll have to share some risks and responsibilities. Among other things, they must create a central authority to supervise banks throughout the euro area and pool resources should there be the need to rescue a bank whose collapse could overwhelm a government’s finances.