Eurozone seals deal for banks to share bailout burden

 

Euro countries agreed on Sunday that the private sector will share the burden in future bailouts after an existing emergency fund expires in 2013, a diplomat told AFP.

Bailouts will in future be organised with "case-by-case participation of private sector creditors" the EU source said, and would be "fully consistent with IMF" terms and conditions.

In Dublin, the International Monetary Fund was set to announce the detail of an 85-billion-euro international bailout of Ireland, Europe's second this year after agreeing to pump 110 billion euros into Greece.

But as fears of crashing dominoes across and even beyond the eurozone rise, with Portugal and Spain already in markets' sights and even France "categorically" denying it was at risk, ministers were determined to fix their approach to a permanent rescue mechanism.

They discussed a Franco-German deal struck in the morning to make the private sector share the future burden, which another source said "foresees contributions on a case-by-case basis."

That was a key demand put forward by German Chancellor Angela Merkel, who originally wanted such "haircuts" for creditors - banks and other financial institutions that buy government bonds, or credit notes - to be pre-written into contracts at point of sale.