The political situation in France (and hopefully in Germany) is creating a window of opportunity that must be seized.

The completion of the banking union with a joint deposit insurance (in Community parlance, EDIS) should be given the highest priority, and, indeed, be brought forward by the European Council under the new Leaders’ Agenda. This is feasible if the main players in the Council accept the need to address the stumbling blocks holding us back with fresh eyes and constructive determination.

Completing the banking union should be recognized as a top priority because the current system remains exposed to potentially disruptive confidence and liquidity shocks hitting the banks of a member states, since depositors do not enjoy equal protection within the eurozone. More generally, persistent market fragmentation – a very adverse legacy of the twin financial crises of recent years that is too often underestimated – reduces the scope of private risk sharing through capital markets; leaving governments exposed to the fresh need of public resources when their banks are hit by idiosyncratic shocks, which in return raises the danger of reigniting the ‘doom loop’ between banking and sovereign crises.

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