Rehn hails 'breakthrough' deal to fund failed banks
EUROPEAN Commission Vice President Olli Rehn has hailed a "crucial breakthrough" agreement between eurozone finance ministers on funding for failed banks.
After emerging in the early hours of yesterday from an emergency meeting of finance ministers in Brussels, Mr Rehn said the tentative deal would pave the way for the construction of a banking union.
The ministers had been locked in talks on how to fund an EU mechanism for winding up failing banks, ahead of a meeting involving all European finance ministers.A €55bn Single Resolution Fund (SRF), built up through levies on the banks, will be among the mechanisms used to pay the cost but it won't be up and running for years.
But a "viable compromise for a backstop" in the interim has been agreed.
And importantly, that would involve Europe's bailout pot, the European Stability Mechanism (ESM).
"We have achieved a crucial breakthrough in the building of a banking union," Mr Rehn said.
"It's been clarified and it's going to be a viable compromise for a backstop." Mr Rehn said the ESM would be involved, but he wouldn't give further detail.
Reuters reported that until there is enough money built up in the SRF, governments will be able to impose more levies on banks. If that doesn't suffice, they would help with public money.
If a government hasn't enough money, it could borrow from the ESM, like the Spanish government did to recapitalise its banks in 2012
Finance Ministers from all 28 member states met in a bid to build on what had been achieved among the eurozone ministers and reach agreement ahead of a leader's summit today.
Germany Chancellor Angela Merkel had heaped pressure on the ministers to reach a deal before today's summit begins.
After the emergency meeting, Eurogroup President Jeroen Dijsselbloem said ministers had come "a long way" and that he was optimistic and deal involving all 28 ministers could be finalised.
Entering the talks yesterday, Finance Minister Michael Noonan said it was very important that a so-called backstop be agreed.