Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.Does the road to eurozone salvation pass through a European banking union? Policymakers increasingly seem to think so. The European Commission pushed clearly in that direction yesterday. The president of the European Central Bank, Mario Draghi, has said such a union is necessary. And the proposal will be under discussion by leaders at the Brussels summit later this month.
That's encouraging, since it suggests that the euro cent is finally dropping for Europe's leaders. It has dawned on them that not all of Europe's problems can be solved by spending cuts and tax rises. Ireland's massive sovereign debt pile is not a consequence of irresponsible government spending – as some in Germany have bone-headedly insisted – but the result of bailing out a gigantic domestic banking sector that went berserk in the boom years. Similarly in Spain, a collapsing private banking sector pumped up an enormous construction bubble and now threatens to capsize a government that was actually fiscally conservative.
There are two deadly feedback loops that result from weakened banking sectors. First, institutions, nursing big unrecognised losses from bad loans, are cutting off credit flows to sound European companies, helping to push economies into recession. Second, nervous depositors are accelerating the crisis by withdrawing money from banks in the periphery out of fear that they might not get their savings back, or that their money could end up converted overnight into new drachmas, punts, escudos or pesetas.
If Europe could agree to clean up the Continent's banks – by recapitalising them from a central European bailout fund and guaranteeing that ordinary depositors will always be paid back in euros – they would take the pressure off struggling governments, reducing the risk of a eurozone breakup.
While a banking union would be a necessary condition, it would not be sufficient. For that, the struggling nations of the periphery also need to see some hope of growth. And quickly.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments