EU leaders strike deal to bail out crisis-hit banks

Finance ministers of the European Union today reached a deal on new rules to bailout or close down failed banks in the future without causing a burden on the taxpayers.
After more than seven hours of negotiations in Brussels, which lasted till the early hours of this morning, the finance ministers agreed that first of all, the shareholders and bondholders of a troubled bank will have to bear the costs.
If that is not sufficient, then depositors with more than 100,000 euros in their accounts will be asked to contribute.
Taxpayers will have to step in to fill a financing gap only as the last resort to avert a bankruptcy.

Ireland's Finance Minister Michael Noonan, who chaired the meeting in his capacity as the current president of the EU council of ministers, hailed the agreement as a "major milestone in our efforts to break the vicious link" between the bank and the state.
It is also intended to prevent collapse of banks in the future and to enable an early intervention by national authorities, he said.

The ministers also decided that savers below 100,000 euros will be exempted from any liability for a failed bank and their deposits will be fully protected, Noonan told a news conference after the meeting.

The agreement among the finance ministers is seen as an important signal for the EU leaders to press ahead with their plans for a banking union in the 27-nation bloc when they convene for a two-day summit in Brussels this evening.
The deal was finally reached after a meeting of the finance ministers in Luxembourg on Saturday broke down in disputes over more flexibility for the member-nations and who should bear the future costs.
Since the outbreak of the financial crisis in 2008, taxpayers have been shouldering the costs of billions of euros pumped in across Europe to bail out a number of "system relevant" banks, whose collapse could unleash a chain reaction and threaten the stability of a nation.

Ireland teetered on the verge of bankruptcy after its banking sector got into trouble and a substantial part of a rescue package of 85 billion euros it received from the EU and the International Monetary Fund in November, 2010 was intended to prop up its ailing banks.
Spain's financial crisis was triggered by its troubled banking sector and euro zone's fourth largest economy received a financial lifeline of 100 billion euros by the EU and the IMF in July, last year to stabilise its banking sector.