GERMANY, the Netherlands and Finland issued a joint declaration yesterday that appeared to unravel much of what was agreed at the last European summit in June, when EU leaders paved the way for the direct recapitalisation of problem banks.
In a statement issued after a meeting of their finance ministers in Helsinki, the three AAA-rated countries set out the terms under which they would be willing to allow the Eurozone’s permanent rescue fund, the ESM, to recapitalise at-risk banks.
But the statement made a sharp distinction between future banking problems and “legacy” difficulties – essentially saying that highly indebted banks in Spain, Ireland and Greece will remain the responsibility of those countries’ governments.
That is likely to frustrate Spain and Ireland in particular, as both had interpreted the June summit as implying that a way would be found to break the debilitating link between their indebted banks and the debts of the government.
City A.M. Reporter