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EU shifts bailout burden to banks

EU finance ministers have struck a draft deal on who foots the bill when a bank fails within the 27-nation bloc. Ministers said bank shareholders and big creditors would bear the main burden, and not taxpayers.

A draft EU deal on how to manage troubled banks was reached in Brussels early Thursday - ahead of an EU summit. The burden would shift to shareholders, creditors and large depositors - and affect taxpayers only in exceptional circumstances..

"The agreement tonight marks a major milestone in our effort to break the vicious link between the banks and the sovereigns," said Finance Minister Michael Noonan of Ireland, which holds the EU's rotating presidency.  Lithuania takes over the presidency next week.

The apparent deal would pave the way for EU member states to start negotiations with the European Parliament and would be a step toward establishing a so-called banking union within the recession-hit bloc.

During the 2008-2009 financial crisis, countries like Britain, Ireland and Germany pumped fresh capital into ailing banks to avoid a financial system collapse.

The agreement came ahead of a summit of EU leaders on Thursday and Friday that will aim to tackle another key consequence of the crisis - youth unemployment.

'One set of rules'

Early on Thursday, Dutch Finance Minister Jeroen Dijsselbloem said: "If a bank gets in trouble, we will now throughout Europe have one set of rules on who pays the bill."

"The financial sector itself will now to a very, very large extent become responsible for dealing with its own problems," he said.

"A good agreement, which enables us to build the banking union and boost financial stability in Europe," French Finance Minister Pierre Moscovici wrote in a social network message.

Another diplomat texted: "Solid agreement between member states."

Under the proposed rules, public funds to rescue banks would only be allowed exceptionally after banks had expended 8 percent of their own assets in rescue moves.

Depositors with accounts under 100,000 euros ($132,000) would not be burdened.

"Savers will have to think very carefully in the future about where they put their money," Austrian Finance Minister Maria Fekter noted. "Choosing the institution with the highest interest rates – no matter how credible it is - these times are over."

"We are moving forward step by step," said German Finance Minister Wolfgang Schäuble. "This was long, ... arduous and intense."

17 plus 10

At similar talks last week, ministers had argued on whether the same rules should apply for the 17 countries that share the euro currency and the 10 members like Britain and Sweden that have their own currencies

The ministers had been under pressure to deliver a deal this week, amid fears that a delay would not leave enough time to complete the legislative process before next year's European elections.

A year ago, EU leaders pledged to tackle the region's lingering financial crisis by setting up a banking union to reassure markets and businesses.

As a second pillar, supervision and potential rescues of banks would be handed to a European institution that is to start operating next year.

ipj/slk (AP, AFP; dpa)

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