When history books trace the evolution of the euro crisis, September 2012 will mark the beginning of a new chapter. Recent days have seen decisive moves from Europe’s notoriously incremental policymaking machinery. On September 12th Germany’s constitutional court backed the European Stability Mechanism (ESM), the euro zone’s permanent rescue fund, removing the last big hurdle to its launch. The same day, the European Commission laid out a blueprint for joint European banking supervision, the first step to a banking union. Days earlier the European Central Bank (ECB) announced that, under certain conditions, it would buy unlimited amounts of the bonds of troubled euro-zone countries.
Taken together, these actions mark a big change. At best, they constitute the foundations of a more sustainable monetary union. The euro zone now has a plan for bank supervision. It will be haggled over and watered-down, but the record of European diplomacy suggests that once proposals exist, something, eventually, tends to be agreed on…. Most important, the euro zone now has a central bank committed to being a lender of last resort. Yes, the commitment is conditional on countries securing help from, and adhering to, a rescue plan. But the ECB has made clear, for the first time, that it is willing to intervene without limit if need be.