Europe moves to levy bank failure tax

09:14, May 27, 2010      

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Banks will never again be allowed to call on taxpayers to clean up their mess, under plans for a new Europe-wide crisis insurance levy unveiled Wednesday.

"What I'm proposing is logical - banks paying for banks, not taxpayers," the European Union's financial services chief, former French foreign minister Michel Barnier, said after outlining a new insolvency tax on banks to be raised by each of the bloc's 27 members.

Barnier stressed that the levy would operate at the national level, but he did not exclude the possibility that monies collected within one territory could be accessed by banks in trouble in another.

He also stressed that what is on the table is "not a European, federal fund (but a) pragmatic and realistic" course of action to follow today.

"Prevention is better than a cure - and it's always cheaper," Barnier said, citing the huge cost to European governments - about 13 percent of output - to bail out banks since the financial crisis broke in late 2008.

He said the funds would "manage bank failure, protect financial stability and limit contagion," but he stressed that there would be no bailouts.

According to European Commission chief Jose Manuel Barroso, the levy should be obligatory.

Europe is due to have a new system of financial supervision and regulation in place on January 1, separately covering banks, insurers and financial markets, although arguments have raged for months within EU members and at the European Parliament.

Source: Global Times


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