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Eurozone banking union sees progress
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Eurozone finance ministers made progress yesterday on some details of a plan to close banks, paving the way for completion of a eurozone “banking union” that is to restore morale in the financial sector and boost growth.
More than five years into a financial storm that toppled banks and dragged down nations from Ireland to Spain, Europe wants to seal its biggest project since the introduction of the euro — a framework to police banks and tackle their problems together.
German Chancellor Angela Merkel underscored the importance of the talks to complete the banking union, saying she hoped the ministers would reach a deal before she and other EU leaders meet today.
“For the acceptance of the euro on financial markets, the banking union is very important,” Merkel said on Tuesday.
That gives finance ministers 36 hours to clinch overall deal on an agency and fund to shut weak banks to complement European Central Bank supervision of the sector if European Union leaders are to ink it this week.
A crucial part of the project was agreed in the small hours of yesterday after seven hours of talks — how to ensure financing for closing down banks.
This agreement boosts chances of an overall deal on the blueprint on dealing with failing lenders to meet the deadline set by Merkel and other EU leaders and boosting chances the reform will become reality in 2015.
Under the agreement, banks will provide the cash to pay for the closure of failed lenders, giving roughly 55 billion euros (US$76 billion) over 10 years accumulated in a Single Resolution Fund.
Until then, however, if there is not enough money from the fees, governments will be able to impose more levies on banks. If that does not suffice, they would help with public money.
If a government would not have enough money, it could borrow from the eurozone bailout fund ESM, like the Spain did in 2012, according to the deal reached by the ministers.
This is a victory for Germany, which was reluctant for eurozone countries to share the costs of winding down banks elsewhere in the eurozone for as long as possible.
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