EU Banking Union Takes Step Forward

The EU took a step closer to an EU banking union at the Summit yesterday, a union that intends to impose closer supervision on a financial sector stricken by the sovereign debt crisis.

The urgent measures follow the near-collapse of Greek, Spanish and Cypriot banks which need multi-billion-euro bailouts to cover their losses amid an EU-wide recession. Banks have also been exposed to massive losses on Greece's debt writedown, in which private sector investors had to suffer the loss of at least 50 percent of their investment in Greek bonds.

The banking union would allow the European Stability Mechanism (ESM) to directly recapitalise banks that run into trouble and would have the involvement of the European Central Bank (ECB). The conditions of the banking union will be presented by July 9th, according to a statement made after the EU Summit.

EU leaders also agreed on a stimulus package worth 120 billion euros to boost growth and improve the job market.

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