The Eurozone Debt Crisis and the European Banking Union: A Cautionary Tale of Failure and Reform

The 2008 global financial crisis spread to most of the developed economies, including those of the European Union. Unfortunately, despite decades of effort to build a Single Financial Market, almost all EU jurisdictions lacked proper crisis resolution mechanisms, especially with respect to the cross-border dimensions of a global crisis. This led to a threat of widespread bank failures in
EU countries and near collapse of their financial systems. Today, in the context of the Eurozone financial crisis, the EU is at a critical crossroads. It has to decide whether the road to recovery runs through closer integration of financial policies and of bank supervision and resolution, or whether to take the path of fragmentation with a gradual return to controlled forms of protectionism in the pursuit of narrow national interest, although the latter is bound to endanger
the single market. Therefore, the policy dilemmas facing the EU and contemporary institution building within the Eurozone provide an important window into the future of both global and regional financial integration.