Time is running out for the European Union to meet its own year-end deadline to create a single bank regulator, or at least the legal framework for one. Sadly, Europe’s leaders are again leaning toward procrastination on a reform crucial to saving the euro.

Europe’s banking problem is entering its fifth year. The EU has 27 regulators with 27 sets of rules, undercapitalized banks that can’t afford to lend anymore and governments that lack the wherewithal to bail them out. Eventually, weak banks will start to topple, and what has been a slow-burning crisis could become a disaster.

EU heads of state agreed in June to a common banking authority when they feared that bank runs might occur in Greece, Italy and Spain. In exchange for giving up some national sovereignty to ensure that every institution follows the same rules, governments would be able to obtain capital for their banks directly from the EU’s bailout fund, without adding to their own liabilities.

It made sense. No longer would individual governments have to bail out their banks, only to need a rescue of their own later. The shared risk and stricter supervision of a banking union were especially important to Spain, which can’t afford to come to the aid of its sick banks.

When it comes to EU politics, however, nothing is simple. The member states remain at odds over such basics as whether the European Central Bank should be the uber-supervisor and, if so, whether it should oversee all 6,000 EU banks or just the largest ones. And if the ECB gets the nod, how would banks in Sweden, the U.K. and other countries that don’t belong to the single currency -- and therefore don’t have a voice at the ECB -- make sure their views are represented?

These aren’t small issues. Still, EU finance ministers should get on with it and, at this week’s EU summit, present their heads of state with an outline of how a banking union could operate. At the very least it should include a single supervisor. It should also offer an EU-wide system of deposit insurance and a process for unwinding failing banks.

One big obstacle is German Finance Minister Wolfgang Schaeuble, who favors a two-tier system in which existing national regulators remain -- and have the final word in most cases -- while the ECB oversees a handful of global banks. This contradicts what the heads of state agreed to and should be tamped down. It also goes against reality: As Greece, Ireland, Spain and other countries have seen, small banks are just as likely to run into trouble as big banks.

Objections over unequal treatment of non-euro countries can be finessed. The legal problem is that ECB rules can’t be changed without amending the underlying treaties establishing the central bank, which could take years. But the EU often skirts seemingly impossible treaty concerns with practical solutions.

One option is to make the ECB the ultimate regulator but require it to consult with non-euro-area governments, perhaps even giving them a veto during a phase-in period lasting several years. A variant of that option: Create a euro-area-only bank regulator and invite other countries to sign up later. After all, it would be difficult for the ECB to begin monitoring 6,000 banks overnight. In the meantime, as the ECB builds up its expertise, the euro-area governments could work on a structural fix for the ECB or pursue treaty amendments.

Only with a supranational banking supervisor can the EU sever the unhealthy link between banks and governments. Further delays could undermine the market’s confidence and set back the clock on this year’s progress.

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