banking union framework and the stability of the european banking sector

In the past few years, the ECB faced many challenges in conducting the monetary policy in Eurozone. The sovereign debt crisis revealed the economic growth divergence between center and periphery in the European model. The creation of the Eurozone increased the correlation link between the banking sector and the public debt. The European authorities’ role is to break down the doom loop between public debt and banks. During the sovereign debt crisis ECB exceeded its monetary policy objective of price stability through diverse operations assimilated by the markets as debt monetization. The Banking Union framework should approach three sensitive points related to fiscal sustainability, an integrated financial system and an EMU shock absorption mechanism.