Financial Times
June 3, 2012
We have reached a rare moment in the eurozone crisis: I seem to be more optimistic than financial markets. I do not believe that Greece will leave the eurozone and I see a small chance that the June 28 meeting of the European Council will bring agreement on a banking union of sufficient strength.
The idea of a banking union has momentum. Mario Draghi, European Central Bank president, said last week that bank restructurings should be centralised because governments have made a hash of it. Mr Draghi, along with Mario Monti, Italian prime minister, was the driving force behind a discussion on the subject during a recent informal dinner of the European Council.
A previously sceptical Angela Merkel seems to be more open to the idea, but lacks enthusiasm. It was the German chancellor who in 2008 rejected the idea of a pan-European fund to cope with the collapse of Lehman Brothers. At that time, the eurozone took the catastrophic decision that each country must rescue its own banks. That was the day when the eurozone crisis started.
Her reported change of heart can only mean one of three things. First, she may genuinely be ready to negotiate a banking union. Second, she may be ready to go for a fudge. A third explanation is that she wants to say no without appearing to say no, perhaps to deflect blame. If it is anything other than the first explanation, we are in trouble.
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