The European Union recommended Wednesday that the 17 countries of the euro common currency union create and fund a banking union for bailing out insolvent banks, preventing the fiscal and political stresses such moves have on individual national governments. The union would be funded by the European Stability Mechanism, one of the EU's standing bailout funds.

In a report that also included specific recommendations of what the EU expects each member of the currency union to do to promote fiscal and financial stability in the Continent, the European Commission stated future building blocks could include a banking union with integrated financial supervision and a single deposit guarantee scheme. Direct recapitalization by the ESM might be envisaged.

However, it is unlikely the recommendation will be supported by Germany, the key partner in any plans regarding the eurozone financial system. Speaking at a regular government briefing just hours after the report was released, German Steffen Seibert said rejection of the idea -- on the part of his government -- that the ESM could be use to directly re-capitalize bank is well known.