Deal on Banking Union Will Test Goal of United Europe - by Andrew Higgens and David Jolly

Battling to defend its credibility after a series of troubled bank failures across the Continent, the European Union hoisted a long banner on the outside wall of its Brussels headquarters last year to trumpet Europe’s march “toward a genuine economic and monetary union.”

It was hardly a rousing battle cry. But it did at least acknowledge that despite the adoption of a common currency, the euro, Europe still had much to do to achieve real economic and monetary integration, a central pillar of the so-called European project since the early 1990s.

Shortly before midnight on Wednesday, after months of meetings in Brussels that often dragged into the wee hours, European finance officials finally reached a deal on how to plug a gaping hole in Europe’s economic defenses, agreeing to a centralized system to shut down sickly banks in the 17 member nations that use the euro.

But as with many of Europe’s grand ambitions, the construction of what was conceived as a solid banking union has been crimped by the often contradictory interests of different countries. The exercise has yielded more of a muddle than a unifying mission. A banking union has often been described as Europe’s most ambitious project since its decision in 1992 to establish a common currency. But the effort to create one has highlighted how difficult it is to act ambitiously for a bloc that has grown from six to 28 member states.

It has no clear shared view on whether it is the nucleus of a future European state, a free-trade zone, or merely an intergovernmental organization that irons out disagreements between countries. Add to this the fact that the bloc’s leaders have starkly different views of what caused Europe’s financial crisis and the long economic malaise that followed, and “it is no wonder the E.U. finds it so hard to take decisions,” said Charles Grant, director of the Center for European Reform, a policy research group.

“You have a sick patient on the bed and doctors gathered around who cannot decide on the nature of the illness or the medicine required to cure the patient.

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