Eurozone countries facing Irish-style bank collapses will still have to shoulder a large portion of future bank bailouts if they want to receive any aid from the eurozone’s €500bn rescue fund, according to a proposal seen by the Financial Times.
The plan, circulated late last year among eurozone finance ministry officials, would force struggling countries to either invest in failing banks alongside the rescue fund, the European Stability Mechanism, or guarantee the ESM against any losses.
By forcing burden-sharing on struggling countries, the plan raises questions about EU leaders’ vow to “break the vicious circle” between failed banks and their host governments.