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Knocking heads, and banks, together

The European Commission has called on the 17 countries in the eurozone, Ireland among them, to create a "banking union" that can centrally oversee and if necessary bail out the sector, which has become a weak link in the continent's financial system.

Bank failures have already overwhelmed the public finances of Ireland, forcing it to take an international bailout, and some fear Spain could be next, the Washington Post reported.

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The commission, while recommending that Spain be given an extra year to meet its deficit targets, suggested that regulation of the entire eurozone banking sector be done centrally.

In its recommendations on how to deal with the financial crisis, which has pushed the shared single currency to the brink, the commission said it wants to boost cross-border management of banks, which are currently overseen by a patchwork of national regulators with different rules.

Part of that would see the eurozone's permanent bailout fund, the ESM, charged with paying for bank bailouts. That would protect individual governments from having their public finances overwhelmed by the cost of rescuing a bank, the report stated.

The EC call came even as reports indicated that Ireland's banks could be in need of an additional €3 to €4 billion in cash in order to remain in business. The money, however, could be raised by the banks themselves rather than it being allocated as an additional bailout, the reports indicated.

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