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Taxpayers should no longer bail out banks: Finnish PM

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(Globalpost/GlobalPost)

Finland called Tuesday for eurozone taxpayers to be spared from bailing out troubled banks in the future, insisting that shareholders and investors ought to foot the bill instead.

"Everywhere in Europe we should be moving towards a normal market economy, where owners and investors suffer losses in the event of a bank failure," Finnish Prime Minister Jyrki Katainen said during a speech about Europe in Helsinki.

He said he hoped a European banking union in the process of being created would have that as a founding principle, otherwise "we will remain in the current situation where the taxpayer pays for bank crises," he told reporters after his speech.

Plans for the banking union include provisions for a 'bail-in' mechanism under which shareholders, then creditors and if needed large depositors would pay for winding up failed banks.

Details on the operation of the first stage of the banking union, a single supervisor, are due to be resolved this year but agreements about winding down banks and shoring up deposit insurance may take years.

Following his speech, members of the prime minister's entourage seemed however to want to tone down his remarks, telling AFP that Finland considered the Cyprus rescue package a "unique" case and not a model to be followed from now on.

They also recalled the Finnish government's position that small savers -- those with deposits of less than 100,000 euros -- must have their savings protected.

Under the Cyprus bailout agreed in Brussels on Monday, deposits up to 100,000 euros ($130,000) are insured and not subject to any tax, while Popular Bank -- Laiki in Greek -- will be wound down and depositors with more than 100,000 euros will face big losses.

In Finland, the only eurozone country to still enjoy a top "triple A" rating from all three main international credit ratings agencies, taxpayers have grown increasingly hostile to the idea of taking part in rescues in other countries.

A recent opinion poll commissioned by Finnish public broadcaster YLE showed that half of Finns no longer want to finance rescue packages abroad even if it means the dissolution of the eurozone.

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http://www.globalpost.com/dispatch/news/afp/130326/taxpayers-should-no-longer-bail-out-banks-finnish-pm