EU banking rescue plan in disarray
Britain and France have expressed dissatisfaction with an EU proposal to create a new funding initiative to cover failing banks in the future. Despite the fact that the likes of Germany and other EU members are in agreement over the creation of "national fund" to help wind up and reorganise troubled banks the UK and France are now arguing heavily against the deal.
The national funds would be created by introducing a tax on the financial sector but the UK government believes this would offer an insurance to the banking industry which may encourage more risk-taking in the future. This is an argument which has been put forward on numerous occasions although on the other side of the coin there is a need to at least offer some protection for to banking system as a whole.
We will likely see an increase in regulatory powers within the European Union in the short to medium term with the financial sector set to be placed in a very strict and a very tight straitjacket. However, until there is collective unity within the European Union we are likely to see the creation of a fully funded national banking bailout fund.
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