Wednesday

30th Nov 2022

Eurozone bailout fund to prop up banks from 2014

  • Dijsselbloem (r) - the agreement represents a 'building block of banking union' (Photo: consilium.europa.eu)

The eurozone's bailout fund will be able to directly prop up weak banks from next year, after ministers reached agreement on Thursday night (20 June)

Under the deal agreed by the bloc's finance ministers in Luxembourg, €60 billion out of the European Stability Mechanism's €500 billion lending capacity will be allocated to bank recapitalization.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Klaus Regling, the German managing director of the ESM, indicated that the direct recap instrument would be ready in the second quarter of 2014, in time for the next round of 'stress tests' on Europe's banks and before the European Central Bank assumes its new duties as supervisor of the eurozone banking sector. He described the €60 billion as "more than sufficient".

Member states seeking to utilise the new instrument would have to stump up 20 percent of the recapitalization costs. Governments would also be required to inject extra funds to bring banks up to the 4.5 percent minimum capital buffer.

The formal guidelines for the recap instrument will be drawn up on the basis of the rules on bank recovery and resolution currently under discussion with ministers and MEPs.

Ministers agreed "one of the building blocks of banking union," said Jeroen Dijsselbloem, who chairs the Eurogroup, at the press conference following the talks.

He also left open the prospect of the eurozone's four bailout countries being allowed to use the new facility.

"It will have to be decided case-by-case and by mutual agreement," he said, adding that "it's up to the member states to apply for it."

The agreement brings a close to a year of tortuous negotiations on one of the main tools in breaking the links between indebted banks and governments. Ireland and Spain were pushed to the point of bankruptcy as a result of guaranteeing the debts accrued by their private banks.

German finance minister, Wolfgang Schaueble, who had led resistance to allowing the bailout fund to directly support banks, called the move an "important step on the way to the banking union by agreeing on the main points for a future regime for direct bank recapitalization."

For his part, EU economic affairs commissioner Olli Rehn welcomed what he described as "serious progress on direct bank recap".

"We have taken another step to…break the vicious link between banks and sovereigns by diluting the link between them," he added.

Ministers also backed Latvia's bid to become the eighteenth member of the single currency in January 2014, with EU leaders expected to confirm the decision at next week's summit.

EU ministers agree rules on bank collapses

Bank shareholders and creditors will be first in line to suffer losses if their bank gets into difficulties, according to draft rules agreed by ministers Thursday.

Investigation

Asbestos — two to three times more deadly than known

Where once working men in heavy industry were diagnosed with cancers related to a more direct exposure to asbestos, now women in professions such as teaching, nursing and other occupations are being diagnosed, as well as young people.

News in Brief

  1. 'Pro-Kremlin group' in EU Parliament cyberattack
  2. Ukraine will decide on any peace talks, Borrell says
  3. Germany blocks sale of chip factory to Chinese subsidiary
  4. Strikes and protests over cost-of-living grip Greece, Belgium
  5. Liberal MEPs want Musk quizzed in parliament
  6. Bulgarian policeman shot dead at Turkish border
  7. 89 people allowed to disembark in Italy, aid group says
  8. UN chief tells world: Cooperate on climate or perish

Stakeholders' Highlights

  1. Nordic Council of MinistersCOP27: Food systems transformation for climate action
  2. Nordic Council of MinistersThe Nordic Region and the African Union urge the COP27 to talk about gender equality
  3. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  4. Friedrich Naumann Foundation European DialogueGender x Geopolitics: Shaping an Inclusive Foreign Security Policy for Europe
  5. Obama FoundationThe Obama Foundation Opens Applications for its Leaders Program in Europe
  6. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos

Latest News

  1. EU Commission proposes suspending billions to Hungary
  2. EU: Russian assets to be returned in case of peace treaty
  3. Frontex leadership candidates grilled by MEPs
  4. Portugal was poised to scrap 'Golden Visas' - why didn't it?
  5. Why the EU asbestos directive revision ... needs revising
  6. Nato renews membership vow to Ukraine
  7. Catalan spyware victims demand justice
  8. Is the overwhelming critique of Qatar hypocritical?

Join EUobserver

Support quality EU news

Join us