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Countdown to reach banking union deal

Monday, March 10, 2014 - 02:13

March 10 - European Union governments and parliamentarians will try to reach a compromise this week on how to wind down failing banks and who picks up the bill. As Joanna Partridge reports the need for a deal is becoming increasingly urgent.

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The pressure is on. Euro zone finance ministers meeting in Brussels have to reach a deal on long-awaited banking union within the next week. Talks are expected to be lengthy - lasting three days. If the ministers - representing EU governments - and the European Parliament can't agree, they'll run out of time to complete the legislative process before European elections in May, delaying everything by at least 7 months. SOUNDBITE Pierre Moscovici, saying (French): "Everyone, all of us, will make an effort towards a compromise." Policymakers have already agreed the ECB will take on supervision of all euro zone banks in November. But there are still some sticking points. A major one - who would decide how to wind down or close failing banks. Mike Ingram is from BGC Partners. SOUNDBITE: Mike Ingram, Market strategist, BGC Partners, saying (English): "The two isssues are to what extent is that decision left with the national supervisor, as opposed to the ECB. And the other issue is where do the costs of winding the bank up actually lie, the financial costs, and there again it's the same old problem of whether it's the national government who foots the bill or whether this is actually parcelled out to the euro zone as a whole." EU governments and the European Parliament want different things. The Parliament believes the ECB should decide if a bank is failing - but governments want their national authorities to have a say too. They also disagree on how quickly they need to build up the shared resolution fund and how soon all countries should be able to access the money in it. Saxo Bank's Nick Beecroft believes ministers will strike a deal. SOUNDBITE: Nick Beecroft, Senior Market Analyst, Saxo Bank, saying (English): "Without a fiscal union and a banking union, I don't think the euro can survive beyond another five years. This week is a staging point and hopefully a very successful one and I think very probably so. Let us never underestimate the political will to make the euro succeed." Banking union and more stress tests are seen as a vital step towards restoring confidence and boosting lending. As the recovery gains pace, banks are under more pressure to lend to households and businesses, which they've been reluctant to do while they were trying to raise capital and reduce the number of bad loans.

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Countdown to reach banking union deal

Monday, March 10, 2014 - 02:13