EU’s Rehn steps up fight to prop up banks

EU economy commissioner Olli Rehn said on Monday that letting a new eurozone firewall recapitalise banks should be considered as a ‘serious possibility’.

Talk of a ‘banking union’ has shot to the top of the European Union’s political agenda as in Spain, the eurozone’s fourth largest economy, banks are struggling to find over $100 billion.

Asked if it was time to let the 800-billion-euro European Stability Mechanism, due to begin operating on 1 July, intervene, Rehn said this was ‘a key issue, short and long term, when talking about possible schemes for banking union.’

‘From the Commission’s point of view, we have been considering this as a serious possibility of breaking the link between sovereigns and banks,’ Rehn said.

‘This is not a part of the ESM treaty for the moment in its present form,’ Rehn acknowledged, but it would be ‘important to consider’ as an alternative ‘so we can go to the roots of the current debt crisis.’ Rehn knows he faces a tough sell to convince German Chancellor Angela Merkel to back down on her opposition to allowing the ESM to intervene directly.

But he argued after talks with French finance minister Pierre Moscovici that a plan of this sort would end Europe’s vicious circle of state and banking bailouts.
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