European finance ministers appear to have made a breakthrough in their long-standing efforts to deal with failing banks. But other tough issues remained to be resolved in discussions today.
An agreement will complete the framework for a proposed banking union that officials hope will boost confidence in the sector and prevent bank failures from threatening the financial health of governments. There's already been an agreement to centralise the oversight for the biggest banks in the 17-country eurozone.
One of the reasons why Europe got into such a big financial mess was that governments had to step in to save their banks at various points since the financial crisis first exploded in 2007-8.
The ministers from the 17 European Union countries that use the euro, the so-called Eurogroup, met till the early hours of today morning, before resuming discussions with colleagues from the wider 28-country EU.
Michael Noonan, Ireland's finance minister, said he and the other Eurogroup ministers had agreed in principle that the banking industry should bear the cost of recapitalising or liquidating bad banks. But he said many details remained to be worked out.
"As long as the principle 'the industry pays' is established, I'll agree it," Noonan said. "And I'm prepared to negotiate the vehicle that would deliver that and ensure that."
There's been a lengthy debate about how to finance the rescue mechanism for insolvent banks, and whether European taxpayers should be on the hook. Germany, Europe's biggest economy, insisted that bank rescue costs be borne by banks themselves.
Olli Rehn, the EU's top monetary affairs commissioner, said eurozone ministers' agreement represented a "crucial breakthrough."
The finance ministers are trying to reach agreement before a summit of EU leaders Thursday in Brussels. EU Commission President Jose Manual Barroso urged ministers Wednesday to reach a deal by the end of the day. "It's feasible with a bit of festive spirit," Barroso said in a post on Twitter.
