Kein bailout

31 October 2010 By Pierre Briancon

The German government is proposing a European approach to a banking resolution fund. But after Berlin refused to agree on a Greek bailout, EU members with stronger banking systems than Germany won’t like being asked to help sort out a financial mess they didn’t cause.

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The German government on March 31 agreed on new bank restructuring rules, including the introduction of a levy, which would aim at reducing "moral hazard", or banks assuming they can always be bailed out with taxpayer money. Contributions would be linked to banks' size and risks posed to the financial system. German Finance Minister Wolfgang Schaeuble had previously indicated the levy would go to a fund, and raise about 1 billion euros a year.

Schaeuble added, in a joint press conference with French Economy Minister Christine Lagarde, that the German proposal should be "embedded in a European structure". France and Germany insisted the bank levy should be part of a global effort, but Lagarde indicated that France preferred a tax that would go to the general budget.

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