Daniel Gros, 12 February 2016

The Eurozone’s ‘Banking Union’ created a system of banking supervision and a common institution to restructure troubled banks. There remain two issues, however, that need to be addressed:  banks are holding too much debt of their own sovereign, and deposit insurance is only backstopped at the national level. This column argues that these issues need to be addressed simultaneously for economic and political reasons. Specifically, periphery and core countries hold opposing positions on remedies to the respective problems. A combination of the two makes economic sense and could represent an acceptable political compromise.

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