European leaders will discuss ways of forming an EU wide banking union at a summit in Brussels this week, according to a document released ahead of the crunch meeting.
The plans aim to break the link between the bloc’s bad banks and indebted governments. EU officials are said to believe such a union could be achieved in a year.
A single European banking supervisor and a common EU deposit-guarantee scheme are just two of the proposals on the table.
In addition to a new banking framework, the pre-summit document reveals leaders are likely to look at much closer long-term integration.
That would go beyond the recently negotiated fiscal pact agreed between 25 of the EU’s 27 countries, and almost certainly require treaty amendments.
While it is unclear how long such changes would take to implement, once agreed, the pre-summit paper suggests pooling of Europe’s debt would become much more realistic. What shape such mutualisation might appear, however, still remains a mystery.
Up to now Germany has refused to even entertain the idea of eurobonds saying it will not underwrite the liabilities of other eurozone countries before deeper integration takes place.
EU Council President Herman Van Rompuy has said he hopes to have more concrete proposals on closer political and economic union for a summit later this year.