How do we explain the creation of the EU banking union? This study focuses on the developments from late-2011 to June 2012 which led to the Euro Summit agreement on establishing a joint banking supervision in the eurozone. The paper explores both a material interests approach as well as an ideational approach. While the escalating crisis caused an openness for policy change among the involved actors, the game changer that led to the June 2012 agreement was the appearance of the vicious circle between banks and sovereigns. By showing that crises of the sovereign and of banks were intertwined, it linked two policy communities which were until then separated. It was then the European Commission which successfully promoted ‘banking union’ as response to the vicious circle. This led to several policy-reversals among member states and paved the way for the June 2012 Euro Summit agreement finally leading to banking union.
The sources consulted for this paper are policy statements by member states and institutions in which they outline their preferences as well as interviews with more than 50 policy-makers, among them members of the European Council and the Euro Group as well as other relevant staff involved in the negotiations.
