It is generally accepted that the Eurozone needs a banking union with a single regulator if it is to avoid another financial crisis.
Part of the difficulty of dealing with the present sovereign debt debacle in the European Union is the painful, opaque entanglement of financial institutions from different member states. A banking union will provide transparency about how vulnerable financial institutions are across the Eurozone and how they should be wrapped up, if necessary.
While Germany has emerged as the paymaster of the Eurozone — funding the bailout of Greece and Portugal, for example — much of this is in its own self-interest. German financial institutions are among those who lent money to these now over-burdened countries. For now, Germany, not unreasonably, wants to maintain as much influence as possible over the use of the funds it is contributing to the Eurozone bailouts. The European Commission, however, wants responsibility dealing with bad banks to lie with it. This is a clash about political power as much as it is about financial policies. The German government is not likely to relent much as it is facing elections in October. After that, however, both sides must move towards a quick resolution.