This paper is concerned with the failing banks of the Euro Zone and the subsequent legislation and policies that have been passed to help vulnerable banks in failing nations like Italy, Spain, and Ireland recapitalize. Although the bloc countries of the EU agree on the shared objective of stabilizing the Euro zone’s economy by bailing out the vulnerable banks, they can’t seem to agree on a consensus especially with regard to creating an ECB supervisor. The nations of the Euro Zone have since agreed on a direct aid fund that requires the presence of a European Central Bank regulatory presence to monitor and enforce budget discipline but the plan has since met some resistance from Germany and Britain. These two nations are particularly wealthy members of the EU that benefit from having political autonomy over their banks.
In particular, I ask the question “Does political autonomy pose a threat for the EU’s bailout plan’s success?.” I argue that more central regulation and less political autonomy from the states is required to enforce budget discipline especially considering that a select few countries foot the bill for the dwindling economies of these other nations.
The first section of my paper will introduce the large bailout fund and its requirement. The next section will discuss the impediments and obstacles in the way for the legislature. I follow with a discussion of the potential benefits of the plan and lastly with a discussion of how political influence of these macroeconomic decisions has been critical in the past with the trend of financial globalization, and how this analysis may be applied to the current EU crisis.