* Countries seek EU-wide rules on shutting banks
* Savers with more than 100,000 euros face losses
* France and Germany divided over draft law
By John O'Donnell and Robin Emmott
LUXEMBOURG, June 21 The European Union will seek
on Friday to forge rules to force losses on large savers when
banks fail, a sensitive reform that could shape how the euro
zone deals with its sickly banks.
Finance ministers in Luxembourg will try to resolve one of
the most difficult questions posed by Europe's banking crisis -
how to shut failed banks without sowing panic or burdening
"The costs of future restructurings can't be wished away,"
said a senior EU official involved in the talks. "We need a
mechanism to shift the burden away from taxpayers."
The European Union spent the equivalent of a third of its
economic output on saving its banks between 2008 and 2011,
plundering taxpayer cash but struggling to contain the crisis
and in the case of Ireland, almost bankrupting the country.
But France and Germany are divided over how strict the new
rules should be, with Paris worried that imposing losses on
depositors could prompt a bank run.
A draft EU law that will form the basis of discussions
recommends a pecking order in which first bank shareholders
would take losses, then bondholders and finally depositors with
more than 100,000 euros ($132,000) in their account.
That would make the harsh treatment of savers, which was
part of Cyprus's bailout in March, a permanent feature of
Europe's response to future banking crises. EU countries would
be required to follow these rules when closing banks.
Finding a prompt solution is important as Europe tries to
put more than five years of financial turmoil behind it and
emerge from economic stagnation.
"We must act now while we still remember the crisis," Erkki
Liikanen, a member of the European Central Bank's governing
council, said in Brussels before the meeting.
RESISTANCE IN LONDON, PARIS
A central element to ensure the euro zone's long-term
survival is a system to supervise, control and support its
banks, known as banking union.
Common rules in the wider European Union are considered a
stepping stone towards the euro zone's banking union.
Agreeing EU-wide norms would address Germany's demand that
European rules on closing banks be in place before the 17-nation
euro zone's bailout fund can help banks in trouble.
Euro zone finance ministers agreed late on Thursday to set
aside 60 billion euros to help banks via the fund, the European
If agreed, the new EU rules would take effect at the start
of 2015 with the provisions to impose losses coming as late as
Still, the idea has divided EU governments.
Britain and France say countries should have the final word
in deciding how to close banks and not be tightly bound by any
new EU rules.
But Germany, the Netherlands and Austria want regulations
that will be applied in the same way across all 27 countries in
the European Union. They fear that granting too much national
leeway would undermine the new law.
"Some flexibility might be necessary, but it shouldn't be
too much," Joerg Asmussen, the German member of the European
Central Bank executive board, told reporters, arguing that
investors need to know the rules of the game.