Fondation Robert Schuman, European Issues n° 332, 10th November 2014
The reform of the euro launched in June 2012 is based on two main points: the strengthening of economic governance and Banking Union. The latter is twofold and comprises - centralised supervision by the ECB and an innovative crisis management mechanism. Before taking on its new tasks the ECB undertook a health-check, unprecedented in terms of its scope, of the banks in the euro zone in order to consolidate the sector, restore confidence and to foster the reactivation of credit. This paper analyses how this exercise was undertaken before assessing its quality and seeing what is to be learnt from it, both regarding the banks' situation, as well as the issues and challenges raised by the new supervisory mechanism. The "truth" operation undertaken by the ECB has been successful on the whole since it has strengthened the institution's credibility and augurs positively for the continuation of Banking Union. However the latter will only be able to take full effect with the strengthening of the second foundation of the reform of the euro, i.e. with the introduction of a kinf of economic government that has the capacity to play a safety net function for the guarantee mechanisms of Banking Union - via a budget - and to start a powerful programme to bring the euro zone out of stagnation.