Europe sketches plan to close troubled banks
By Emmanuel Jarry and Annika Breidthardt
BRUSSELS (Reuters) - Euro zone countries edged closer on Tuesday to agreeing a plan to close ailing banks and sharing the costs, a move that would pave the way for a fundamental reform to underpin the currency and its banks.
After a financial storm that toppled banks and dragged down states from Ireland to Spain, countries examined a fresh blueprint outlining what to do when a bank fails, a critical second pillar of a wider reform dubbed banking union.
The draft plan, circulated among EU ministers at a meeting in Brussels, spells out how a new agency may close failing banks in the euro zone and crucially, how the cost can be shared out among countries in the scheme.
If agreed, this would overcome the long-standing objections of Germany and reinforce the scheme. But it remains to be seen if France, Spain and others will sign up.
Europe's biggest economy has so far opposed the use of euro zone money to repair banks in countries such as Spain because it does not want to end up footing the bill.
In return, however, Germany wants a new treaty agreement between governments in the scheme, a step which will be cumbersome at the very least.
Furthermore, any such sharing of euro zone money should only be possible one decade after the start of scheme - set for 2015. Lastly, Germany wants to skew voting on some decisions about closing banks according to the size of the country.
The deal, which will not be finalized before next week, is to build the second pillar of the banking union, viewed as essential to shore up the currency-sharing group against future debt and financial crises. Continued...