BRUSSELS, June 16 (UPI) -- European financial leaders Saturday said they were working to break the co-dependent cycle between the region's banks and their governments.
Concerning a plan in development with the heads of the European Council, European Commission and the European Central Bank, ECB executive board member Benoit Coere said the plan aimed to stop "the adverse feedback loop between banks and sovereigns, in which doubts about the solvency of the sovereigns feeds doubts about the solvency of the banks, and vice versa."
ECB President Mario Draghi Friday said the plan would be unveiled "in a matter of days."
The plan is expected to advocate for a banking union in which eurozone members contribute to one unified fund to guarantee bank deposits, imitating the role of the Federal Deposit Insurance Corp. in the United States, The New York Times reported.
The plan is also expected to strengthen the role of the ECB as the region's centralized bank regulator at the expense of the European Banking Authority, which has been relatively ineffective throughout the financial crisis.
The plan avoids recommending a euro bond, which Germany strongly opposes.
With the aim of preventing bank runs and fears of sovereign defaults, the plan is expected make a subtle switch on demands made of countries that require international assistance.
The austerity cuts imposed on borrowers will aim at cuts in operating costs, while leaving job-creating infrastructure projects in place, the Times reported.