Brussels sets out rules for EU finance rescues
The European Union's executive body on Monday set out the rules that EU member states should follow when rescuing banks or financial institutions on the day that the bloc's biggest members, Germany and France, published their own massive guarantee schemes, reported dpa.
"This guidance demonstrates how (EU) state-aid rules form an important part of the solution to current problems on financial markets," EU Competition Commissioner Neelie Kroes said in a statement.
According to the European Commission, the EU's Brussels-based executive, EU states which want to intervene in their domestic financial markets must make sure that any guarantees they offer apply to all banks on their territory.
That is an implied criticism of the Irish government, which on September 30 proposed a 400-billion-euro (536-billion-dollar) guarantee to deposits in Irish-owned banks. The proposal has since been revised to include non-Irish banks.
Further demands include that government interventions be limited in time and scope to covering the immediate impact of the financial crisis, and that private-sector players who benefit from such guarantees should make an "appropriate contribution."
Finally, governments should make sure that the companies which benefit from bail-outs do not abuse the privilege by, for example, buying up weaker rivals, and should ensure that any bail-outs are followed up with "structural adjustment measures" to make sure that markets can in future function without bail-outs.
The commission announcement comes a day after the heads of the 15 countries which use the euro held an unprecedented summit in Paris at which they agreed to far-reaching guarantees to the banking system.
Those guarantees were based on a British plan, launched last week, which the British government reportedly drew up in close consultation with commission competition experts.
On Monday the French and German governments launched their own guarantee schemes totalling over 800 billion euros.
On Wednesday EU heads of state and government are set to gather in Brussels for a regular summit whose agenda is set to be dominated by the financial crisis.