European Union decides upon approach to bank bailouts

The European Union has announced the first proposal for how to handle failing banks in the future, while affecting citizens as little as possible. Up until now it has generally been the taxpayers that have footed the bill, for what many to be the bank’s own mistakes.

The proposal suggests that the backers of the banks should be the first to have any financial implications and then by those that are generally considered to be “wealthy”. The European Union and its financial ministers have decided to take the controversial route of using funds from savings accounts that contain €100,000 or more, a move that has been seen in the past with other situations that required banking bailouts – such as in Cyprus.

Once all of those measures have taken place then the national government should look to assist the banks, hopefully stopping them from falling any further into trouble. If further action is still required then the European Union will consider a formal request from the government, if one is made.

The controversy surrounding the policy of sourcing funds from savings accounts with more than €100,000 in them goes back to earlier this year when Cyprus were asked to go through the same process as part of their bailout agreement. While many were happy that the poor were not targeted, there were concerns that people’s nest eggs for the future were-being stripped to solve a problem that they did not necessarily cause.