Nearly 18 months ago, with Ireland in an international rescue because of a bank bailout it could not afford and Spain on the verge of a similar collapse, EU leaders came up with an unexpected solution: make Europe’s banks the responsibility of Europe, rather than individual countries.
The decision was as simple as it was surprising. By shifting the burden of paying for collapsed banks from national treasuries to an EU-wide rescue system, never again would otherwise healthy governments be brought low by irresponsible bankers. The EU would break the link between governments and the banks that do business in their country.
But as EU leaders congratulate themselves for nearly completing their so-called “banking union”, many analysts and officials – including at the top of the European Central Bank, now responsible for supervising banks in the new system – worry that it has fallen far short of that goal.