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

Video One Year After Thai Coup, No End in Sight for Military Rule

Since carrying out the May 22, 2014 coup, the general has retired from the military but is still firmly in charge More

Video Afghan Economy Sinks As Troops Depart

Afghans are grappling with how exodus will affect country's fragile economy More

Video Scientists Say We Need Softer Robots

Today’s robots are mostly hard, rigid machines, with sharp edges and forceful movements, but researchers at Carnegie Mellon University say they should be softer and therefore safer More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Turkey's Main Opposition Party Hopes for Election Breakthroughi
X
May 22, 2015 10:23 AM
Turkey’s main opposition Republican People’s Party has sought an image change ahead of the June 7 general election. The move comes after suffering successive defeats at the hands of the Islamist-rooted AK Party, which has portrayed it as hostile to religion. Dorian Jones reports from the western city of Izmir.
Video

Video Turkey's Main Opposition Party Hopes for Election Breakthrough

Turkey’s main opposition Republican People’s Party has sought an image change ahead of the June 7 general election. The move comes after suffering successive defeats at the hands of the Islamist-rooted AK Party, which has portrayed it as hostile to religion. Dorian Jones reports from the western city of Izmir.
Video

Video Europe Follows US Lead in Tackling ‘Conflict Minerals’

Metals mined from conflict zones in places like the Democratic Republic of Congo are often sold by warlords to buy weapons. This week European lawmakers voted to force manufacturers to prove that their supply chains are not inadvertently fueling conflicts and human rights abuses. Henry Ridgwell reports from London.
Video

Video Class Tackles Questions of Race, Discrimination

Unrest in some U.S. cities is more than just a trending news item at Ladue Middle School in St. Louis, Missouri. As VOA’s Kane Farabaugh reports, it’s a focus of a multicultural studies class engaging students in wide-ranging discussions about racial tensions and police aggression.
Video

Video Mind-Controlled Prosthetics Are Getting Closer

Scientists and engineers are making substantial advances towards the ultimate goal in prosthetics – creation of limbs that can be controlled by the wearer’s mind. Thanks to sophisticated sensors capable of picking up the brain’s signals, an amputee in Iceland is literally bringing us one step closer to that goal. VOA’s George Putic reports.
Video

Video Afghan Economy Sinks As Foreign Troops Depart

As international troops prepare to leave Afghanistan, and many foreign aid groups follow, Afghans are grappling with how the exodus will affect the country's fragile economy. Ayesha Tanzeem reports from the Afghan capital, Kabul.
Video

Video Poverty, Ignorance Force Underage Girls Into Marriage

The recent marriage of a 17-year old Chechen girl to a local police chief who was 30 years older and already had a wife caused an outcry in Russia and beyond. The bride was reportedly forced to marry and her parents were intimidated into giving their consent. The union spotlighted yet again the plight of many underage girls in developing countries. Zlatica Hoke reports poverty, ignorance and fear are behind the practice, especially in Asia and Africa.
Video

Video South Korea Marks Gwangju Uprising Anniversary

South Korea this week marked the 35th anniversary of a protest that turned deadly. The Gwangju Uprising is credited with starting the country’s democratic revolution after it was violently quelled by South Korea’s former military rulers. But as Jason Strother reports, some observers worry that democracy has recently been eroded.
Video

Video California’s Water System Not Created To Handle Current Drought

The drought in California is moving into its fourth year. While the state's governor is mandating a reduction in urban water use, most of the water used in California is for agriculture. But both city dwellers and farmers are feeling the impact of the drought. Some experts say the state’s water system was not created to handle long periods of drought. Elizabeth Lee reports from Ventura County, an agricultural region just northwest of Los Angeles.
Video

Video How to Clone a Mammoth: The Science of De-Extinction

An international team of scientists has sequenced the complete genome of the woolly mammoth. Led by the Swedish Museum of Natural History in Stockholm, the work opens the door to recreate the huge herbivore, which last roamed the Earth 4,000 years ago. VOA’s Rosanne Skirble considers the science of de-extinction and its place on the planet
Video

Video Blind Boy Defines His Life with Music

Cole Moran was born blind. He also has cognitive delays and other birth defects. He has to learn everything by ear. Nevertheless, the 12-year-old has had an insatiable love for music since he was born. VOA’s June Soh introduces us to the young phenomenal harmonica player.

VOA Blogs

World Currencies

EUR
USD
0.8982
JPY
USD
121.07
GBP
USD
0.6376
CAD
USD
1.2215
INR
USD
63.612

Rates may not be current.