Barroso outlines radical shake-up plan for banks
THE European Commission says banks should be helped, if necessary, to bolster their reserves but banned from paying dividends to shareholders or bonuses to employees as part of a radical plan to stem the financial crisis and avert a second global recession.
"Reactive and piecemeal responses to different aspects of the crisis are no longer sufficient," European Commission President Jose-Manuel Barroso told the European Parliament in Brussels yesterday. "We now need to get ahead of the curve."
His proposals are the sort of comprehensive solution that leaders have long talked about but that have never come to pass. The commission now hopes states will adopt them at a crucial summit in two weeks.
Other elements of Mr Barroso's so-called roadmap call on EU leaders to bring forward the introduction of a permanent rescue mechanism for states to mid-2012 from mid-2013 and a sixth loan to Greece.
"The roadmap charts Europe's way out of the economic crisis," Mr Barroso said. The commission president will meet Enda Kenny today as part of a campaign to meet the leaders of the EU's smaller states and wrestle control of the European Union agenda back from France and Germany.
One of the main planks of Mr Barroso's plan is "a fully co-ordinated approach to strengthen Europe's banks" based on a stricter assessment of bank health using a "temporary significantly higher capital ratio of highest quality capital".
The head of the EU executive also spelt out how weak banks could be helped, and said national governments should provide support if investors cannot be found.
If states were not able to step in, banks could get assistance from the European Financial Stability Facility (EFSF).
The proposals also call for extra powers for the European Commission to intervene in the preparation of national budgets and in monitoring their execution.
"Only in this way we will be able to convince our citizens, our global partners and the markets that we have the solutions that measure up to the challenges all economies are facing," Mr Barroso said.
Analysts said the plan would face resistance among the bloc's 27 members, many of which have been wary of putting up more money to shore up struggling governments and banks.
Slovakia's rejection this week of eurozone plans to boost a bailout fund was the latest and most dramatic example.
Ahead of the plan's announcement, banking shares across Europe rallied. Allied Irish soared 28pc while Irish