Banking union could have meant bail-in, not bailout

EU leaders have reached agreement on a significant step towards a full banking union across the region, which is a necessary pre-condition for breaking the link between sovereign and bank debt.

The release of the Anglo tapes this week underlines how important it is for eurozone member states to have an agreed framework in place for what to do with a failing bank. If the eurozone had a banking union in Sept 2008, the crisis would have panned out much differently for Ireland.

Prior to the bank guarantee and the implosion of the economy, there was a debt-to-GDP ratio of 25%. On current growth projections, debt-to-GDP is now forecast to peak at 123% next year.