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Euro zone moves towards banking union

Wednesday, December 18, 2013 - 02:05

Dec. 18 - Euro zone finance ministers make progress on some details of a plan to close banks, paving the way for completion of a euro zone 'banking union' that aims to restore confidence in the financial sector and boost growth. Ciara Sutton reports.

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One step forward, but a long road ahead - euro zone finance ministers make progress on the 'banking union'. A crucial part of the project has been agreed - how to ensure financing for closing down banks. It's hoped the progress will help restore confidence in the financial sector and boost growth. Standard Chartered's Sarah Hewin says the decisions are encouraging. SOUNDBITE: Sarah Hewin, Head of Research, Standard Chartered, saying (English): " Looking back a month or so ago it seemed unlikely that they would be able to reach an agreement before the end of the year. So there has been progress. Clearly it's a compromise between what Germany wanted and what the European Central Bank and European Commission wanted. But overall I think we're in a positive place here." Under the agreement, banks will provide the cash to close down failed lenders - they'll put around 55 billion euros into a Single Resolution Fund over the next 10 years. Until then, governments will be able to impose levies on banks. It's a victory for Germany, which is determined to prevent euro zone tax payers picking up any more costs. But not everyone's convinced by the deal so far - Swedish Finance Minister Anders Borg. (SOUNDBITE) (English) SWEDISH FINANCE MINISTER ANDERS BORG SAYING: "This looks to be some what of a complex banking union, so we are a little bit worried that it will not give a confidence boost to the recovery of the European economy. It is a very complicated process and there are some uncertainties considering the backstops." EU leaders hope to sign off a deal later this week in order to boost the chance of reforms becoming reality in 2015. There are still sticking points to overcome, including who will have the power to close down banks that don't make the grade. But more than five years after the start of a financial storm that toppled banks and dragged down the likes of Ireland and Spain, the EU hopes it is close to an agreement which will prevent a similar crisis being repeated.