Is Integration the Solution?


If Greece decides to leave the euro, it could spark greater instability in the euro zone and lead investors and depositors to flee from other peripheral countries. A more integrated banking system in Europe could help pave the way for stability in the future, says IESE Prof. Xavier Vives of the Department of Economics. 

Deeper financial integration would  break the close link that currently exists betweeen sovereign risk and banking risk. With this in mind, the EU has proposed setting up a single banking union, which would serve as supervisor, insurer and regulator for the euro zone.

IESE Economics Weekly