In a proposal that represents one the most significant surrenders of national sovereignty since the creation of the euro in 1999, the European Commission, the EU's executive arm, proposed Wednesday to make the European Central Bank the single supervisor for all 6,000 banks in the 17 countries that use the currency.
The Commission wants to give the ECB sweeping powers: from the ability to grant and take away banking licenses to extensive authority to investigate and fine wayward banks.
Jose Manuel Barroso, the Commission's president, warned that giving up control of banks would be just the start and that countries would have to get used to handing over powers to Europe in order to solve the region's debt problems. "A deep and genuine economic and monetary union ... means ultimately that the present European Union must evolve," he added. "And let's not be afraid of the words. We will need to move toward a federation of nation states."
Barroso's remarks go to the heart of the debate about the survival of the eurozone — whether countries can continue to share a common currency without a unified political system.
As part of forging a tighter EU, many observers and politicians have called for a "banking union" — a unified playbook for all the region's banks. The creation of a single bank supervisor is an important part of this plan and a pre-requisite to other measures being debated: a European-wide system of depositors' insurance; a single method for winding down bankrupt banks; and allowing the European bailout fund to directly help banks in trouble, instead of lending money only to governments.
In his speech Wednesday, Barroso warned that leaders must find a way out of the crisis because it is "fueling populism and extremism."
