The European Commission has distanced itself from a German, Finnish and Dutch statement that appeared to dash hopes that the eurozone's bailout fund could soon be used to recapitalise banks directly in countries such as Spain.
Olivier Bailly, a commission spokesman, said eurozone governments should move "quickly" to break the link between bank troubles and sovereign debt and that an agreement reached in June by eurozone governments was "extremely clear" in expressing a determination to sever that tie.
"Our position regarding breaking the vicious circle between the banks and the sovereign is very clear", Mr Bailly told a media briefing. "We already showed our determination that for us, this should be done quickly." He said it was up to Member States to work out "the final design" of the European Stability Mechanism, the eurozone's permanent rescue fund, which is expected to become operational next month.
In a joint statement on Tuesday, the finance ministers of Germany, Finland and the Netherlands said the new bailout fund should only directly recapitalise banks for new problems that emerge as a "last resort" after private resources and those of national taxpayers are mobilised. The three ministers said national governments should continue to be responsible for resolving so-called legacy problems created by bad lending decisions in the past.
Austria's finance ministry echoed their position, saying "recapitalisation should only occur for restructured, freed and viable banks". "Recapitalisation possibilities for banks can't be about the ESM simply taking over the old stock of all existing troubled assets and bad banks in various nation states. This responsibility should remain with the nation states", ministry spokesman Gregor Schütze said in an email to The Wall Street Journal.
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