Yet it has to follow a deeper fiscal union as it would imply significantly increased risk sharing amongst countries. Introducing a banking union without having established a genuine, democratically legitimated fiscal union would risk undermining the no bail-out clause and the disciplining effects of financial markets on fiscal policy.
From a formal perspective it necessitates amending the EU Treaty – meaning it is very unlikely to be a short-term fix to the current challenges mainly related to recapitalisation needs in some banking systems, to political risks and to contagion effects within the euro area. The same is true regarding the proposed introduction of eurobonds.