Debt: Euro Zone States Debate Bank Plans

Italy, Spain, and Portugal may find the proposals too costly

Italy, Spain, and Portugal may find the proposals too costly

On Saturday, EU leaders were in a deadlock over a decision about bolstering eurozone banks.

Some officials say that ministers are near to reaching an overarching agreement, but some warn that Spain, Italy, and Portugal may hold back reform because of their objections to cost.

Too expensive

One eurozone leader told the press that Spain, Italy, and Portugal “don’t want to pay” the projected costs of an EU-wide bank bolster.

Much of the debate concerns how countries will have access to the eurozone’s rescue fund, with Italy and Spain objecting to the programme of bailout aid they will need to strengthen their banking system.

Another important issue is the use of state guarantees for the purpose of helping banks refinance.

The refinancing of European banks is an effort to win bank confidence in the European market and keep banks from being hit by a credit freeze by helping them borrow again. Market confidence is imperative, as worries about the future of the eurozone are believed to be stagnating economies across Europe.

Despite general agreement that banks need to have their capital boosted by billions of euros, the details of when and who will pay remain unsettled.

Settlement ‘on Wednesday’

However, on Saturday German Chancellor Angela Merkel also said that she expected a breakthrough in talks to happen “on Wednesday.”

She said that the decisions that go into a comprehensive response to the eurozone debt crisis will be “far-reaching,” and that she believes the body of EU finance ministers have made progress.

Markel believes the progress has been enough to let them “achieve our ambitious targets by Wednesday,” she said.

Besides recapitalising banks, EU leaders from all 24 countries are together to make plans about leverging the eurozone bailout fund and getting a second financing package to Greece.

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