Unholy compromise in the eurozone and how to right it. CEPS Policy Brief No. 277, 16 July 2012

This paper reviews the causes of the ongoing crisis in the eurozone and the policies needed to restore stability in financial markets and reassure a bewildered public. Its main message is that the EU will not overcome the crisis until it has a comprehensive and convincing set of policies in place; able to address simultaneously budgetary discipline and the sovereign debt crisis, the banking crisis, adequate liquidity provision by the ECB and dismal growth. The text updates and expands on his Policy Brief contributed in the run-up to the emergency European Council meeting at the end of June.

The challenges of Europe's fourfold union. Bruegel Policy Contribution 2012/13, 16 August 2012

Five years after the first tremors in Europe’s banking system, what makes the crisis unique is the absence of a democratically accountable decision-making framework; there is an 'executive deficit' that compounds Europe’s democratic deficit. The author argues that the only way to resolve the crisis successfully is a sustained effort to achieve a 'fourfold union' agenda: banking union, fiscal union, competitiveness union and political union. Progress must be made in parallel on each of the four components. In particular, successful progress towards banking union requires a combination of short term action, including the establishment of a temporary resolution authority to identify undercapitalised banks and to restructure them, and longer-term measures, including the creation of permanent authorities for supervision, resolution and deposit insurance.

Europe's single supervisory mechanism and the long journey towards banking union. Bruegel Policy Contribution 2012/16, 4 October 2012

Problems in the banking system are at the core of the current crisis. The establishment of a banking union is a necessary (though not sufficient) condition for eventual crisis resolution that respects the integrity of the euro. The European Commission’s proposal for the establishment of a Single Supervisory Mechanism and related reform of the European Banking Authority (EBA) do not and cannot create a fully-fledged banking union, but represent a broadly adequate step on the basis of the leaders’ declaration of 29 June 2012 and of the decision to use Article 127(6) of the treaty as legal basis. The proposal rightly endows the European Central Bank (ECB) with broad authority over banks within the supervisory mechanism’s geographical perimeter; however, the status of non-euro area member states willing to participate in this mechanism, and the governance and decision-making processes of the ECB in this respect, call for further elaboration. Further adjustments are also desirable in the proposed reform of the EBA, even though they must probably retain a stopgap character pending the more substantial review planned in 2014.