Recently, euro-zone policy makers have made commendable progress towards banking union. They have now agreed an ‘operational framework’ for the region’s bail-out fund, the ESM, to recapitalise banks and drawn up a new regime to ‘bail-in’ bank creditors. But while this should improve the region’s long-term prospects, it does little to help in the short term. Not only is implementation a distant prospect, but it is becoming increasingly clear that the euro-zone’s banking union is designed to prevent the next crisis, not deal with the current one.
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