IT IS the most ambitious change in Europe since the launch of the euro: to transfer to European authorities the supervision of euro-zone banks and the power to wind them up, using a common European fund if necessary. The principle of a banking union is easy to state. But turning it into reality requires a jigsaw of legal texts that have kept finance ministers working overtime.A deal now seems close at hand. Ministers hope to reach an overarching agreement in time for a European Union summit on December 19th, and to complete the legal process before the European elections in May. “Banking union will be done,” declared Pierre Moscovici, the French finance minister, after two nights of hard bargaining this week. But will it be the real thing?The project was launched in June 2012 at the height of Spain’s crisis, when euro-zone leaders vowed to “break the vicious circle between banks and sovereigns”. A new euro-zone bank supervisor would be created, in turn allowing the euro-zone rescue fund directly to recapitalise troubled banks. The burden of saving Spanish banks, and perhaps Irish ones too, would be taken off the shoulders of weak sovereigns. The bargain fits…
