This paper argues that a fully-fledged banking union is needed to stabilise the euro and to prevent a decade of high unemployment and low growth in the Vulnerable Euro Area Periphery Countries (VEAPs). What has been agreed by the European Council and the European Parliament in March 2014 is a step forward but remains insufficient. A further transfer of responsibilities to European institutions and more risk sharing are essential to sever the doomed loop of banks and sovereigns because individual EU countries are too weak to address this challenge alone.

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