News / Economy

Europe Agrees on How to Deal With Failed Banks

European Parliament President Martin Schulz holds a news conference during a European Union leaders summit in Brussels, Belgium, June 27, 2013.
European Parliament President Martin Schulz holds a news conference during a European Union leaders summit in Brussels, Belgium, June 27, 2013.
Selah Hennessy
— The European Union (EU) has moved one step closer to forming a long-heralded banking union after finance ministers agreed on a new deal for bank bailouts. Tthe deal came as European leaders meet in Brussels to hammer out Europe-wide policies.

European Union finance ministers tried and failed to tackle the banking issue in negotiations last week but they finally struck an agreement in the early hours of Thursday morning.

According to the deal, in the future, taxpayers will not take the first hit when struggling banks need a helping hand.

Instead, the bank’s creditors and shareholders will take the first hit, followed by those with savings of over $130,000 in the bank.

A taxpayer funded bailout of failed banks will now only be a last resort.

Eurogroup President Jeroen Dijsselbloem said, "That's a major shift from the public means from the taxpayer, if you will, back to the financial sector itself, which will now become for a very large extent, responsible for dealing with its own problems."

Europe’s banking sector has been hit hard by the world financial crisis and sovereign debt crises across a number of European Union countries.

Countries like Ireland, Britain and Germany have had to pump billions of dollars  of fresh money into struggling banks to keep them from collapsing.

Wolfgang Schaeuble, the Finance Minister for Germany, Europe’s largest economy, said it’s clear that in principle when banks get into difficulties in the future, the taxpayer should not be the first in line to pay.

Instead, a so-called banking union for Europe will be eventually established  which would be aimed at creating financial stability across Europe.

European Union governments will still have to negotiate the legislation with the European Parliament - but the rules could come into effect by 2018.

Financial analysts said Thursday that the decision will be good for the markets because it creates some certainty that individual states will not have to prop up failing banks in future.
 
But Joe Rundle, head of trading at Britain’s ETX Capital, said it’s yet to be seen how the policy will play out.

"I think the big fear is when it comes to a bank in trouble, is, are the countries going to stick to the rules or are there going to be exceptional circumstances which require a different set of rules for that bank," he said.

Also on Thursday the heads of the European Parliament and European Commission agreed on a new European Union budget for the next seven years that is worth $1.3 trillion and will finance EU projects through the year 2020.

You May Like

Lebanese Media Unite to Support Palestinians in Gaza

Joint newscast billed as Arab world’s first unified news bulletin in support of Hamas-controlled Gaza Strip More

Photogallery Australian PM Alleges ‘Coverup’ at MH17 Crash Site

Meanwhile, Russia's ambassador to Malaysia denies plane's black boxes were opened before they were handed over to Malaysian officials More

Despite Advances in AIDS Treatment, Stigma Lingers

Leading immunologist tells VOA that stigma is often what prevents those infected with disease from seeking treatment More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
IAEA: Iran Turns its Enriched Uranium Into Less Harmful Formi
X
July 22, 2014 10:26 AM
Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.
Video

Video IAEA: Iran Turns its Enriched Uranium Into Less Harmful Form

Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.
Video

Video Relic of Saint Draws Catholics Worried About Immigration Issue

A Roman Catholic saint who is a figure of devotion for those crossing the border into the United States is attracting believers concerned about the plight of undocumented immigrants. Mike O'Sullivan reports from Los Angeles, where a relic of Saint Toribio has drawn thousands to local churches.
Video

Video Ukraine Rebels Surrender MH17 Black Boxes

After days of negotiations, a senior separatist leader handed over two black boxes from an airliner downed over eastern Ukraine to Malaysian experts early Tuesday. While on Monday, the U.N. Security Council unanimously demanded that armed groups controlling the crash site allow safe and unrestricted access to the wreckage.
Video

Video In Cambodia, HIV Diagnosis Brings Deadly Shame

Although HIV/AIDS is now a treatable condition, a positive diagnosis is still a life altering experience. In Cambodia, people living with HIV are often disowned by friends, family and the community. This humiliation can be unbearable. We bring you one Cambodian woman’s struggle to overcome a life tragedy and her own HIV positive diagnosis.
Video

Video Nature of Space Exploration Enters New Age

Forty-five years ago this month, the first humans walked on the moon. It was during an era of the space race between the United States and the Soviet Union. World politics have changed since then and -- as Elizabeth Lee reports -- so has the nature of space exploration.
Video

Video Chicago’s Argonne Lab Developing Battery of the Future

In 2012, the U.S. Department of Energy’s Office of Science awarded a $120 million grant to a new technology center focused on battery development - headquartered at Argonne National Laboratory in suburban Chicago, Illinois. As VOA’s Kane Farabaugh reports, there scientists are making the next technological breakthroughs in energy storage.
Video

Video In NW Pakistan, Army Offensive Causes Massive Number of Displaced

Pakistan’s army offensive in North Waziristan has resulted in the large-scale displacement of the local population. VOA's Ayaz Gul reports from northwest Pakistan where authorities say around 80 percent of the estimated 1 million internally displaced persons [IDPs] have settled in Bannu district, while much of the remaining 20 percent are scattered in nearby cities.
Video

Video Kurdish Peshmerga Force Secures Kirkuk, Its Oil

The Kurdistan regional government has sent its Peshmerga troops into the adjacent province of Kirkuk to drive out insurgents, and to secure the area's rich oil fields. By doing this, the regional government has added a fourth province to the three it officially controls. The oil also provides revenue that could make an independent Kurdistan economically strong. VOA’s Jeffrey Young went out with the Peshmerga and filed this report.
Video

Video Malaysia Reeling: Second Air Disaster in Four Months

Malaysia is reeling from the second air disaster in four months involving the country’s flag carrier. Flight 340 vanished in March and despite an extensive search, no debris has been found. And on Thursday, Flight 17, likely hit by a surface-to-air missile, came apart over eastern Ukraine. The two incidents together have left more than 500 people dead. VOA Correspondent Steve Herman reports from Kuala Lumpur.

AppleAndroid

World Currencies

EUR
USD
0.7305
JPY
USD
101.53
GBP
USD
0.5830
CAD
USD
1.0656
INR
USD
60.075

Rates may not be current.