WASHINGTON, June 27, 2013 /PRNewswire-USNewswire/ -- During the financial meltdown of 2008, EU taxpayers pumped billions of euros into ailing banks to keep them from collapsing. EU bloc finance ministers agreed today on a plan to keep that from happening again.
Bank creditors and shareholders will form the first line of defense for the costs of future bank failures, followed by small companies and savers with uninsured deposits worth more than 100,000 euros. Those forced losses would cover up to 8 percent of a bank's total liabilities. If that proved insufficient to save the bank, the national governments would top it up with a bailout possibly worth another 5 percent of the liabilities.
During the crisis of 2008-2011 the European Union spent the equivalent of a third of its economic output on saving its banks, using taxpayer cash.
The deal reached by finance ministers in Brussels removes a major obstacle along the road to creation of an EU banking union. The new rules will take effect no later than 2018.
Next on the agenda of EU leaders is the crisis in youth unemployment, which in southern tier EU nations hovers at 50 percent. The talks will continue in Brussels through Friday.
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