Euro Wades Through Choppy Water to Set Up Banking Union

The euro steadied at $1.30 on Monday morning after soaring as high as $1.32 due to weakness in the dollar. The common currency is in for a bumpy road ahead as the region works toward a centralized banking union that will break the link between the financial system and individual member governments. Most see the creation of the union as the nucleus of the bloc's crisis resolution efforts, and its implementation will be a key factor in the region's future success. Since the union was agreed upon last year, its execution has been complicated to say the least. With 18 different financial systems all operating independently, there is some conflict as to how to restructure and unify. Last week, the European Commission attempted to spell out guidelines for the new banking union and appoint a supervisor. Unsurprisingly, the commission suggested itself as the leader of the new centralized banking structure, which would also give it control of the 55 billion euro resolution fund, set up to help save failing banks in the future. According to the

, many regard the European Commission's plan for the banking union as aggressive; especially since the European Central Bank is expected to begin asset quality reviews of the eurozone's major banks in the near future. The reviews have many people on edge, as they will likely show capital shortfalls in many of the bloc's major banks. As the reviews draw nearer, the debate over who will have the final say in resolving banks with bad debts has gotten more and more heated. Some believe that national regulators have been working together with banks to keep capital deficits off the balance sheets in the hopes that the region will eventually agree to write off bad debts. The problem could be allowed to continue, though, if those national regulators come into power as the European Commission's proposal suggests.