Thorsten Beck, Daniel Gros, Dirk Schoenmaker, 24 June 2012

After more than two years of efforts and innumerable emergency summits, the Eurozone crisis shows now signs of responding to treatment. This column argues that solving the Eurozone crisis requires policies that separate the banking and sovereign facets of the crisis. The losses incurred by Europe’s banks must be swiftly recognised by establishing a European Resolution Authority to identify weak banks and fix or liquidate them. Such an institution needs a fiscal backstop and the ESM should provide one. But this would not create Eurobonds – the very need for Eurobonds might to some extent disappear with a strong banking union.

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