Theoretical Lessons from EMU and Banking Union: Plus ça change

Why did Euro Area member state governments decide to move to Banking Union (BU) — presented by proponents as a crucial move to ‘complete’ Economic and Monetary Union (EMU) — only in 2012, over twenty years after the adoption of the Maastricht Treaty? Why has a certain design for BU been chosen and some elements of this design prioritised over others? This paper interrogates previous academic accounts on the move to and the design of EMU — neofunctionalist, intergovernmentalist and constructivist — evaluating their explanatory power with reference to BU. It is argued that the asymmetrical design of EMU generated a variety of spill-overs and, hence, a neofunctionalist drive to supranationalise control over bank supervision and financial support for banks as part of the so-called ‘completion’ of EMU. However, intergovernmental negotiations informed by moral hazard and domestic political economy concerns explain the asymmetrical design of BU agreed by national governments.