European finance chiefs have decided that when the continent’s banks fail in the future, shareholders, creditors and depositors will bear the brunt of the losses, not taxpayers.

The European Union finance ministers reached agreement Thursday on the new bank rescue plan, after sending hundreds of billions of dollars in bailouts to debt-ridden countries over the last three years.

Often times, the taxpayer-financed rescue packages were targeted to keep failing banks from going bankrupt. But earlier this year, for the first time, large portions of the biggest Cypriot bank accounts were confiscated to help pay for the island nation’s financial rescue. That set a precedent for the new Europe-wide plan.

German Finance Minister Wolfgang Schaeuble said that when banks make bad financial decisions, they will be held responsible.

“The talks were lengthy, quite difficult and intense. But it was to be expected. For the first time the principle is clear that when banks get in trouble, not the taxpayers, but the owners and the creditors of the banks will have to pay.”

Dutch Finance Minister Jeroen Dijsselbloem said banks will be left to deal with their mistakes.

“That’s a major shift from the public means from the taxpayer, if you will, back to the financial sector itself, which will now become for a very large extent, responsible for dealing with its own problems.”

The finance leaders met ahead of a summit of Europe’s heads of state in Brussels, with their discussions aimed at trying to figure out how to cut the continent’s record high unemployment and end its recession that has now lasted a year and a half. [Read More]

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Source: VOA News: War and Conflict