Can Banking Union save the Eurozone?
The future of the eurozone is still in doubt. The eurozone as a whole is barely growing, and some member-states are in severe recession. The financial sector is in a mess. Banks are undercapitalised and borrowing costs in the periphery and core countries are wildly divergent. With the prospect of weak banks dragging down the finances of weak governments (and vice versa), the eurozone is planning to build a banking union, to try to stabilise the financial system.
Yet the banking union currently under construction may do little to break the link between banks and governments in the short term; current European Commission proposals suggest a small common fund for recapitalising and resolving banks, which will grow over time, and be financed by the banks themselves. Member-states will continue to be responsible for providing a backstop in the short term. Should the eurozone take the federal leap – a banking union backstopped by the eurozone as a whole – that some commentators argue would do much to resolve the crisis? Would it be enough? Is such a move politically possible? And what would it mean for the City of London?
Chalk + Talk welcomes Professor Charles Goodhart CBE, Emeritus Professor of Banking and Finance with the Financial Markets Group at the London School of Economics and former member of the Bank of England Monetary Policy Committee (1997-2000), who will give a prognosis for the eurozone, drawing upon recent developments on the European Banking Union.
This event is kindly supported by the ESRC.