FE Editorial : The union Europe needs

Even after three Greek bailouts, tottering Spanish banks, years of painful austerity, and countless make-or-break summits, Europe never seemed to be able to confront the inevitable choice between further integration and eventual dissipation. On December 13, however, it chose the former by signing a deal that gives the European Central Bank (ECB) supervision over the biggest banks in the monetary union—banks with over 30 billion euros in assets and banks, whose balance sheets account for over 20% of a nation’s GDP. This concession to Germany, to keep thousands of smaller banks under national regulators was matched with a concession to France that, if need be, the ECB could step in to regulate the smaller banks as well. This marks yet another decisive step in Europe’s march towards getting it right, a move that began in September with Mario Draghi vowing to do bond purchases to prevent the euro from collapsing to; a few weeks later, the German Constitutional Court okaying the European Stability Mechanism (ESM) with a proviso that raising Germany’s contribution beyond 190 bn euro—given Germany’s paid up capital is just 22 bn euro so far, the chances of this happening are low—will need explicit Parliament approval.

Theoretically, this means the ESM can now utilise its 700 bn euro firepower (including about 200bn euro left over from the EFSF) to directly recapitalise banks in trouble, to break the link between troubled banks and sovereigns—the direct capital to banks was contingent upon a

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