A group of influential European officials proposed a series of
big fixes to the euro currency union
Tuesday, offering a radical vision of change to restore confidence in the region that could take years to put fully in place.
The report — with suggestions such as allowing a central European authority to override national budgets, as well as the issuing of common debt — outlined what amounted to talking points for a much-anticipated European Union summit starting here Thursday. But given the complexity of the E.U., officials warned that such major alterations would have to be paced out over the next decade, with some measures likely to face stiff opposition.
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At least one of the big fixes could start earlier: a banking union that would far more deeply integrate the financial systems of the 17 nations of the euro zone, with the hope that all 27 members of the E.U. would ultimately join. Fiercely independent Britain, which maintains its own currency, has already said it would opt out.
The plan, which European officials said could be operational in about a year, is aimed at boosting market confidence by giving the independent European Central Bank the role of regional bank supervisor, allowing the ECB to override the regulators of national governments. Other parts of the plan involve a type of regionwide deposit insurance to shore up trust in the banking systems of weaker nations, and a new euro-zone-wide structure for the liquidation of failed banks.
Sending a message
Many of the suggestions have been circulating for a while, including the issuance of collective debt, often referred to as “eurobonds,” as well as the establishment of a regional banking union. Though few were surprised by the report — critics have been calling for some of the steps outlined Tuesday since before the advent of the euro — the collective list of proposals sends the clearest message yet from E.U. officials that members must accept far-reaching changes if the common currency is to survive.
Significant details still needed to be worked out, including which banks would fall under regional supervision and how the deposit insurance plan would be funded. And some analysts warned that European leaders should move more quickly to establish the banking union, as a year-long delay could test the patience of financial markets.
Those concerns left investors bracing for the likelihood that the summit starting Thursday will not produce significant progress toward resolving the region’s 2½-year debt crisis. There was no indication, for instance, that German Chancellor Angela Merkel had dropped her opposition to a number of short-term measures being floated by Spain and Italy to halt the investor panic in those nations, where government borrowing costs have soared to dangerous levels.
In fact, as has happened repeatedly at past summits here, European leaders appeared divided by competing visions of crisis management — with Germany urging a methodical pace focused on major changes to the euro zone while rejecting the quick remedies proposed by its harder-hit neighbors.