The European Union agreed on Thursday (December 19) a blueprint to close failing banks but stopped short of a more ambitious plan for the eurozone to unite in tackling its troubled lenders.

More than five years since a financial crisis struck, Europe is on the verge of finalising one its most ambitious reforms since the launch of the euro - an agency and fund to shut problem banks as soon as the European Central Bank starts to police them next year.

The so-called single resolution mechanism (SRM), single supervisory mechanism (SSM) and single deposit guarantee mechanism together constitute the three pillars of the Eurozone's planned banking union, which is intended to cut the vicious circle that links together sovereign debt crises and the banking crisis, and to make sure taxpayers won't foot the bill for future bank bailouts.

"Big momentous day for banking union. Progress made in recent days on a single resolution mechanism and many financial finds is unprecedented - really speaking - we are introducing revolutionary changes to Europe's financial sector so that tax payers no longer foot the bill when banks make mistakes or face crisis, ending the era of massive bailouts," said Michel Barnier, the European commissioner in charge of financial regulation, during a news conference.

The new agreement includes last-resort support from the single resolution fund. During the fund's initial build-up phase, bridge financing would be available from national budgets or the permanent Eurozone rescue fund, known as the European Stability Mechanism.

Despite the progress on Thursday, central elements of the banking union are still missing. For one, Germany continues to stand firm against the use of eurozone money to back a scheme for tackling troubled banks.

Presented by Adam Justice

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