Eurozone 'may need banking union and joint bonds'

31 May 2012

Sweeping changes may need to be made to the eurozone banking system in the near future as the region continues to struggle financially.

That is the suggestion of the European Commission (EC), which yesterday (30 May) published documents in which it put forward the idea of a banking union and eurobonds being introduced to shore-up the economic bloc.

Within its new fiscal strategy for the coming 12 months in the eurozone, the EC also indicated that the direct recapitalization of financiers via its own permanent bailout budget may be necessary.

"Recent reforms have helped to speed up restructuring of the banking sector, which should continue. However, ensuring the stability of the financial sector is still a challenge," it noted.

In addition, the EC insisted the current cycle of weak banks and struggling sovereign states lending to each other needs to be broken sooner rather than later as this is only serving to accentuate the eurozone's problems.

By Gary Cooper

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