European Union president, Herman Van Rompuy, hopes to unveil a proposal for a banking union at this week crunch EU leaders' summit.
Herman Van Rompuy sees banking union as key to breaking the link between bank risk and sovereign debt
A banking union would be the first step in a long-term roadmap to political union that he will outline to EU leaders, with dates and institutional problems such as treaty change set out by year's end.
"Banking union is a fundamental element," he told German paper Welt am Sonntag, in an interview published on Sunday. "I think we can move forward there more quickly than in other areas."
The success of his plan depends on whether EU leaders can overcome opposition to increasing the role of the European Central Bank. The ECB and Germany are opposed to increasing the role of the central bank to allow it become a lender of
last resort and underwrite the sovereign debt of eurozone countries.
Pressure for a banking union has increased in recent week after a rise in Spanish borrowing costs threatened the eurozone's fourth-largest economy and forced the country to seek help from its euro partners to prop up its ailing banks.
Spain is expected to make a formal request for €100bn of aid for its banks on Monday.
Christine Lagarde, the head of the IMF, warned last week that the eurozone is under "acute stress" and at risk of a downward spiral. She urged the eurozone to channel aid directly to struggling banks rather than via governments.
Mr Van Rompuy, who said recently the eurozone stood "at the edge of a cliff" with "a knife at its throat", told German paper Welt am Sonntag on Sunday: "Banking union is a fundamental element. I think we can move forward there more quickly than in other areas."
Proposals for a 'banking union' are expected to include a joint deposit guarantee scheme and a fund to wind down failing banks.
On Friday, German Chancellor Angela Merkel doused hopes of a break-through on proposals by Italy, France, and Spain to deploy the EU rescue funds to cap the bond yields of countries vulnerable to contagion, or to recapitalize banks directly to take the strain off sovereign states.
"Each country wants to help but if I am going to call on taxpayers in Germany, I must have guarantees that all is under control. Responsibility and control go hand in hand," she said after a crucial summit of the eurozone's Big Four powers in Rome.
"If I give moneystriaght to Spanish banks, I can't control what they do. That is how the treaties are written," she said.
WHY I AM NOT A DISPENSATIONALIST; John Nelson Darby is recognized as the father of dispensationalism later made popular in the United States by Cyrus Scofield's Scofield Reference Bible. Charles Henry Mackintosh, 1820–1896, with his popular style spread Darby's teachings to humbler elements in society and may be regarded as the journalist of the Brethren Movement. CHM popularised Darby more than any other Brethren author. As there was no Christian teaching of a “rapture” before Darby began preaching about it in the 1830s, he is sometimes credited with originating the "secret rapture" theory wherein Christ will suddenly remove His bride, the Church, from this world before the judgments of the tribulation. Dispensationalist beliefs about the fate of the Jews and the re-establishment of the Kingdom of Israel put dispensationalists at the forefront of Christian Zionism, because "God is able to graft them in again," and they believe that in His grace he will do so according to their understanding of Old Testament prophecy. They believe that, while the methodologies of God may change, His purposes to bless Israel will never be forgotten, just as He has shown unmerited favour to the Church, He will do so to a remnant of Israel to fulfill all the promises made to the genetic seed of Abraham. I am not a dispensationalist; it is unbiblical.
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