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Thursday, June 27, 2013

Banks in Trouble: European Populism?

In reaching agreement on a proposal to deal with state banks in trouble, the E.U. finance ministers sent two messages: taxpayers would be protected from any open-ended obligation to bail out failed banks and those banks would not be allowed to capitalize on being bailed out. Given the furor that had been unleashed when the E.U. went after depositors in the two largest Cypriot banks, the E.U. ministers were careful to point out “that depositors with less than €100,000 ($130,820) in their accounts would always be safe, while small and midsize companies and bigger savers would only be hit during the most severe bank failures.” Systemically important banks whose failure could be expected to cause the E.U. financial system to collapse would be handled on a case by case basis.
Will the euro be fortified by a federal bank-bailout program?   Source: Estonia Free Press.

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.