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Euro Climbs As Finance Ministers Struggle To Agree On Banking Terms

ByBenzinga
AuthorBenzinga
Published 06/25/2013, 08:22 AM
Updated 05/14/2017, 06:45 AM

The euro edged up to $1.3129 on Tuesday morning after sinking last week due to a stronger dollar.

After huge gains following the US Federal Reserve's announcement that it would begin to taper its stimulus spending toward the end of the year, the dollar retreated a bit because of several comments from Fed officials which quashed speculation of an early stimulus pullback.

However, the euro's rise could be short lived as eurozone policy makers argue over the terms of the region's centralized banking union plans. After unsuccessful negotiations last week, eurozone leaders will meet on Wednesday to try to hammer out the framework for the banking union, namely, who will pay when a bank collapses.

Most eurozone members agree that a banking union is necessary to get the bloc's financial system back on track, but not being able to agree on basic methodologies could put a stop to the whole process. Although leaders agreed to move forward on a banking union which would prevent failing banks from bankrupting governments last year, the prospect of another “bail in” similar to that in Cyprus has some nations on edge.

The original plans called for the banks to be bailed out by taxpayers, but according to Reuters, a debate between France and Germany over how to impose those losses has halted forward progress.

At the moment, most EU finance ministers agree that losses should be the responsibility of shareholders and bondholders first, followed by deposits of more than 100,000 euros. German officials have said they won't sign off on the banking union until the ministers agree on a deal regarding this hierarchy that indicates how the region will implement this system and exactly who will pay for it.

BY Laura Brodbeck

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