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Barnier will announce EU banking levy

THE EU will today propose a levy on European banks that would pay for future bailouts of financial institutions.

Michel Barnier, EU internal market commissioner, is expected to announce the plans to force member countries to implement the tax.

The controversial strategy is intended to limit the cost to tax payers when financial institutions run into difficulties.

The funds would not bail out individual banks but would ensure a future bank failure could be managed in an orderly manner without destabilising the financial system as a whole.

Commission President Jose Manuel Barroso said: “The Commission will adopt a communication on bank resolution funds financed by the banks themselves in order to minimise the cost to taxpayers of an orderly resolution of insolvent banks.”

Most member states back some form of banking levy but there is fierce debate over to how it should be done and how the money raised should be spent.

There are also fears that a “safety net” could encourage risky behaviour among financial institutions.