News / Economy

Eurozone Set for Protracted Battle Over Banking Rules

Spain's Economy Minister Luis de Guindos talks to European Central Bank (ECB) President Mario Draghi (R) during a eurozone finance ministers meeting in Brussels, Dec. 17, 2013.
Spain's Economy Minister Luis de Guindos talks to European Central Bank (ECB) President Mario Draghi (R) during a eurozone finance ministers meeting in Brussels, Dec. 17, 2013.
Reuters
— Eurozone finance ministers started tense talks on Tuesday to agree the details of one of their most ambitious financial reforms yet with a scheme to close banks, a deeply divisive issue on which Germany has dug in its heels.

More than five years into a financial storm that toppled banks and dragged down states from Ireland to Spain, Europe wants to seal its biggest project since the euro - a framework to police banks and tackle their problems together.

As ministers gathered in Brussels, German Chancellor Angela Merkel underscored the importance of the negotiations to complete banking union - of which agreement on how to close bad banks are a key part - and said she hoped they would reach a deal before she and other EU leaders meet on Thursday.

“For the acceptance of the euro on financial markets, the banking union is very important,” said Merkel.

That gives ministers 36 hours to clinch agreement on an agency and fund to shut weak banks to complement European Central Bank supervision of the sector if European Union leaders are to sign off on it this week.

Discussions over a banking union already have dragged on for the best part of a year and are growing ever more complex as they reach their climax.

Wolfgang Schaeuble, Germany's finance minister, sounded a downbeat note before the meeting, saying there was no consensus. “The work remains difficult,” he told reporters. “We have different opinions on several points.”

The sense of urgency was highlighted by Dutch Finance Minister Jeroen Dijsselbloem, who chairs the meetings of euro zone finance ministers. “We have to get a result,” he said.

Olli Rehn, the European economic commissioner who is at the talks, called for everyone to redouble their efforts in order to have “Christmas peace.”

Ministers already have agreed on the first plank of banking union, making the European Central Bank supervisor of the region's largest banks from the end of 2014.

But the second pillar - an agency for winding up problem banks and a fund to pay for the clean-up - is difficult.

Germany, the euro zone's largest economy, has raised the greatest concerns about the fund, which it fears is a step towards sharing the costs of problem banks across the euro zone.

With divisions running deep, ministers may sidestep this thorny issue so as to reach a general political agreement and stick to an ambitious timetable for the banking union project to start in 2015.

'Too cumbersome'

There also is a question mark over the new procedure for closing a bank. Documents circulating among diplomats and seen by Reuters show an increasingly complicated structure emerging.

“The proposal on governance looks very complicated,” said Michael Noonan, finance minister for Ireland, which saw its economy almost collapse after its banking crisis.

“In resolving a bank, one would want to be able to do it over a single weekend at the maximum. So anything that is too cumbersome, with various layers to it, won't be effective.”

A general agreement among the ministers is all that is needed to start negotiations with the European parliament on the legislation.

On Wednesday, ministers from the wider EU will join the group to discuss who will have the power to close down a laggard bank in the euro zone. On Tuesday, the talks are focusing on who pays.

Under draft plans, banks will provide the cash to pay for the closure of failed lenders, giving roughly 55 billion euros [$76 billion] over 10 years.

But ministers cannot yet agree how to ensure there is enough money to deal with closures while the fund is being built up or where it falls short.

Germany wants the government of the country where the bank is based to provide the missing cash, or borrow it from the euro zone's bailout fund, the 500-billion-euro European Stability Mechanism [ESM], as Spain did in 2012.

France worries that would conserve the vicious circle of weak governments trying to support weak banks, though, the very link the euro zone has said it wants to break via a banking union.

Many policymakers want the ESM to act as a back-up, taking on some of the costs of cleaning up a bank closure, but Germany is opposed.

You May Like

Mali's Female Basketball Players Rebound After Islamist Occupation

Islamist extremists ruled northern Mali for most of 2012, imposing strict Sharia law, and now some 18 months later, the region is slowly getting back on its feet More

Video Vietnamese Staging Chinese Product Boycott After Oil Rig Spat

Many Chinese-made products go unsold, for now, with numerous Vietnamese consumers still angry over recent dispute More

Koreas Mark 61st Anniversary of War Armistice

Muted observances on both sides of heavily-armed Demilitarized Zone that separates two decades-long enemies More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Students in Business for Themselvesi
X
Mike O'Sullivan
July 26, 2014 11:04 AM
They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Students in Business for Themselves

They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Astronauts Train in Underwater Lab

In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.
Video

Video Not Even Monks Spared From Thailand’s Junta-Backed Morality Push

With Thailand’s military government firmly in control after May’s bloodless coup, authorities are carrying out plans they say are aimed at restoring discipline, morality and patriotism to all Thais. The measures include a crackdown on illegal gambling, education reforms to promote students’ moral development, and a new 24-hour phone hotline for citizens to report misbehaving monks. Steve Sandford reports from Bangkok.
Video

Video Virtual Program Teaches Farming Skills

In a fast-changing world beset by unpredictable climate conditions, farmers cannot afford to ignore new technology. Researchers in Australia are developing an online virtual world program to share information about climate change and more sustainable farming techniques for sugar cane growers. As VOA's Zlatica Hoke reports, the idea is to create a wider support network for farmers.
Video

Video Airline Expert: Missile will Show Signature on Debris

The debris field from Malaysia Airlines Flight 17 is spread over a 21-kilometer radius in eastern Ukraine. It is expected to take investigators months to sort through the airplane pieces to learn about the missile that brought down the jetliner and who fired it. VOAs Carolyn Presutti explains how this work will be done.
Video

Video Treatment for Childhood Epilepsy Heats up Medical Marijuana Debate

In the United States, marijuana is classed as an illegal drug by the federal government. But nearly half the states have legalized it, to some degree. Proponents say some strains of marijuana might have exceptional health benefits, for treating pain or inflammation in chronic conditions such as cancer, multiple sclerosis and epilepsy. Shelley Schlender reports on a strain of medical marijuana developed in Colorado that is reputed to reduce seizures in childhood epilepsy
Video

Video Airbus Adds Metal 3D Printed Parts to New Jets

By the end of this year, European aircraft manufacturing consortium Airbus plans to deliver the first of its new, extra-wide-body passenger jets, the A350-XWB. Among other technological innovations, the new plane will also incorporate metal parts made in a 3-D printer. VOA's George Putic has more.
Video

Video AIDS Conference Welcomes Exciting Developments in HIV Treatment, Prevention

Significant strides have been made in recent years toward the treatment and prevention of HIV, the virus that causes AIDS. This year, at the International AIDS Conference, the AIDS community welcomed progress on a new pill that may prevent transmission of the deadly virus. VOA’s Anita Powell reports from Melbourne, Australia.
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.

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.