DENMARK: European Union finance ministers meet to discuss how to reform financial institutions in the wake of a sovereign debt crisis that has shaken european economies

Record ID: 572283

  • Title: DENMARK: European Union finance ministers meet to discuss how to reform financial institutions in the wake of a sovereign debt crisis that has shaken european economies
  • Date: 1st April 2012
  • Summary: COPENHAGEN, DENMARK (MARCH 31, 2012) (REUTERS) ITALIAN FINANCE MINISTER VITTORIO GRILLI ARRIVING AND SMILING
  • Embargoed: 16th April 2012 13:00
  • Keywords:
  • Location: Denmark, Denmark
  • Country: Denmark
  • Topics: International Relations
  • Reuters ID: LVABD8VUG33N0F6IUQ4KH7ONWX05
  • Story Text: European Union finance ministers met for a second day on Saturday (March 31) to discuss financial institutions and the regulation of credit rating agencies.
    The ministers were warned of the continued fragility of the region's banks on Friday.
    EU officials said that an aggravation of the sovereign debt crisis, if any, could lead to a credit crunch. This in turn would entail a deep and prolonged recession, the officials told ministers.
    The European Commission wants new rules that would allow the imposition of losses on a failed bank's bond holders, who were largely spared during the financial crisis while shareholders and governments bore the brunt of the cost. But fears of unsettling investors already rattled by losses in the Greek debt restructuring meant the announcement of a proposed framework was delayed.
    Ministers were also set to discuss a pan-European financial tax. Britain is leading the camp of the countries opposing such tax, saying London, the region's biggest trading centre, would likely be hardest hit by the plan.
    Germany has said the euro zone is the smallest feasible grouping required for a financial transaction tax to work. Trying to find a compromise, Germany has proposed to apply the charge initially only to trading in company stock, but still faced resistance to its plans.
    Swedish finance minister Anders Borg called for a pragmatic solution that would include the United Kingdom.
    "There are stamp duties for example in France and the UK that is less costly for the economy and would not have a detrimental effect on the financial market And if we want to find a solution for all the EU 27 we all have to be pragmatic and also try to find a solution that could be accepted in London," Borg said.
    France has already announced it will introduce a 0.1 percent tax on the purchase of listed stock in large French corporations from August. President Nicolas Sarkozy has said he hopes this will set an example for other European nations to follow.
    France is also pushing for a reform of the credit ratings agencies. The French EU commissioner for internal markets Michel Barnier has repeatedly said that rating agencies have precipitated the financial crisis by downgrading already fragile countries in a vicious circle that would then lead to even higher spreads.
    "The agency is one element amongst others for an evaluation but it cannot be the alpha and omega (the one and only) which countries use for their economic policies," French finance minister Francois Baroin said.
    The ministers were also set to prepare the forthcoming G20 and IMF meetings in Washington next month.
    Ministers from the 17 countries sharing the euro currency agreed on Friday (March 30) to raise the ceiling of the bloc bailout funds for indebted countries from 500 to 700 billion euros. The decision will give the euro zone something to present to the G20 finance ministers. A higher euro zone bailout capacity is a pre-condition for most G20 countries to contribute more money to the IMF.
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