In the heat of the crisis in June, FANG governments would agree to anything to stabilize markets, and they did. Once markets stopped gyrating, the ECB stepped in with promises of money printing, and no one was looking, they changed their tune quickly.
The FANG countries started backing away from their June agreements on September 27, when Bundesbank head Jan Weidmann denied that bank recapitalizations would proceed directly from ESM funds breaking the destructive link between the sovereign debt and banking crisis. This was a complete about face from the perceived agreement, which I covered in detail here:
As J.P. Morgan said, “A man always has two reasons for doing anything: a good reason and the real reason.” The good reason the Germans and their FANG allies are using for not allowing the ESM to recapitalize banks directly is that the ESM will be able to leverage its funds three to one by forcing countries to take loans from its facility to be used for bank bailouts rather than having these bailouts come directly from the fund.
The real reason is that the FANG does not want to be joint and severally liable with the PIIGS. This does not bode well for a joint depository insurance scheme, as well.
The only way there will be a genuine banking union in the Eurozone is if there is joint and several liability for all Eurozone banks among the members. If each country remains solely liable for its financial system, you will not have a banking union; hence, the balkanization of the European financial system will continue with FANG banks being perceived as stronger as PIIGS banks.
Whenever a commentator proclaims an end to the eurocrisis, keep these facts in mind. If the euro is to survive, the Eurozone countries will need to have a unified banking system in addition to a closer fiscal union. These two schemes require lots of core country money. Until the FANG decide to ante up, there isn’t a plan, just a lot of talk.