Germany's Süddeutsche Zeitung newspaper reported this weekend on an internal European Commission strategy paper indicating that the EU's internal market commissioner, Michel Barnier, is preparing a law that would tap bank investors and account holders in the future before any aid would be provide by the permanent euro bailout fund, the European Stability Mechanism (ESM). The proposal establishes a hierarchy for who would be hit first when liquidating a bank: shareholders and creditors first and then depositors with more than €100,000 in their accounts. A bank stability fund that each EU country is now being called on to establish would also be tapped. ESM would then only participate in a bailout as a last resort. The EU legislation is expected in June.
The original story from Süddeutsche.de: Reiche Sparer sollen bei Banken-Pleiten haften
Comment:
The naïve hope that Cyprus was not a template is being exposed. EU is working on making "template" which fits the Cyprus modus operandi pretty well, but also note this line in the text: "A bank stability fund that each EU country is now being called on to establish would also be tapped"
This smells of what I written extensively about: A Swedish bank model – financed by tax on AUM (AUM taxes already in place in Italy & Spain although small in size).
Citigroup's estimate for funds needed to "save Europe" is 3.000 billion EURO – but as this is politicians they would want to mix out-of-balance-sheet guarantees with the usual promises to do more. I expect a 3-5% upfront "tax" where we are all given shares in the "TFFBOIPM fund" (The Fund For Bailing Out Idiotic Policy Makers)
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