Wednesday, July 11, 2012
Why Europeans should love banking union
July 11, 2012
We are all supposed to know why the eurozone is in deadlock: Berlin and other surplus states resist putting debt liabilities in common, while deficit states bristle at the prospect of greater European – for which they read German – control.
The narrative of stingy Teutons and proud Latins has literary and political merits. The story resonates deeply enough with Europe’s history to serve as creation (or destruction) myth, and it allows flummoxed politicians to offer perplexed publics morality tales instead of a tough reckoning with the facts. As a guide to good policy, however, this story is more likely to reinforce old mistakes than to improve the state of things.
This is true above all for the task of draining the quagmire that is Europe’s banking system. Two weeks ago, eurozone leaders took a step in that direction – not before time. The prospect that the European Stability Mechanism, a common rescue fund, will be able directly to revive ailing banks, while a eurozone authority takes them in hand (and hopefully puts zombie banks to death), is the first cause for optimism about the monetary union in a long time.