The Eurogroup met in Luxembourg on June 20 and 21 to prepare the groundwork for a banking union, first floated last summer as a way to avoid a return of the debt crisis. Late on Friday night, finance minister reached an agreement in principle to use funds from the European Stability Mechanism (ESM) to recapitalise banks suffering liquidity problems, writes Volkskrant.
In all, the ESM will make €60bn available to be invested in banking shares from 2014. For the Dutch newspaper –
Direct financing via the ESM may put an end to the situation where national governments are forced to help their banks and subsequently find themselves in difficulty.
However, contrary to the initial project, which aimed to completely break the vicious circle between private debt and public debt, the draft adopted by the Eurogroup provides for the involvement of states in the rescue of banks based in those countries.
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Some points remain unclear, however, notes NRC Handelsblad in Amsterdam, which writes that Eurozone countries are deeply split over how a banking union will work.
Who will pay if a bank has to be cleaned up or shut down? There are roughly two camps here: on one side, the Netherlands, which feels that the taxpayers have paid enough for the crisis and that it is now the turn of the financial sector to pay. This is the principle of the bail-in, applied in Cyprus, the Netherlands and Spain. Countries such as France, though, are suspicious of a bail-in. They want each case to be looked at on a case-by-case basis.
This prompts El Periodico to remark that the Eurogroup has opted for a “decaf direct rescue” of banks in trouble: a possible retroactive application of the agreement should be decided "case by case" and unanimously, writes the newspaper, adding that the agreement –
cuts the solidarity among Eurozone countries to a minimum. The final design is very far from the ambitious initial plan when this measure was decided on at the European Council in June 2012 as one of the axes of the Eurozone banking union.