More than five years after the financial crisis struck, Europe is about to finalise one its most ambitious reforms since the launch of the euro: the banking union.
The plan aims to keep tax-payers from bailing out troubled banks. It includes setting up a 55 billion euro fund, financed by the banking industry, over 10 years. A new European agency would also be created, which would decide when and how failing banks would be closed.
Early on Thursday morning, EU finance ministers sealed a broad agreement on the long-awaited pact after more than 13 hours of negotiations. European leaders gathering in Brussels are expected to sign off on the deal later today.
‘Today is a big momentous day for banking union; progress made in recent days on the single resolution mechanism had many financial files is really unprecedented. We are introducing revolutionary changes to Europe’s financial sector so that tax payers no longer pay the price when banks make mistakes or face crisis, ending the era of massive bailout.’ said EU Internal Market Commissioner Michel Barnier.
But despite the progress on Thursday, Germany continues to reject the use of euro zone money to directly rescue banks.
Instead, a government struggling to bailout a failing bank will have to ask for a loan, with strict conditions attached.
‘So we have agreed these principles that will be transposed into intergovernmental agreement possibly in 2 coming months. We approved also general approach on single resolution mechanism, regulation that will go to the trialogue with the European Parliament, it is going to be the job of the Greek presidency and if concluded in the Parliament, I think this will be one of the fastest going legislative files in the European history.’ said Lithuanian Finance Minister and President in office of the EU Council Rimantas Šadžius.
Non-euro zone economies are not subject to the deal but they can decide if they want to opt in.