European Commission recommends banking union
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Stacey Vanek Smith: The European Commission has recommended today that banks in member countries create a union that would help bolster failing banks.
Marketplace’s Chritopher Werth joins us live now from London. Good morning, Christopher.
Christopher Werth: Hey, good morning, Stacey.
Vanek Smith: So Christopher how would this banking union work?
Werth: Well, we are still waiting to see the full report. I’m sure the devil with be in the details, but what the European Commission appears to be promoting here is, if you will, a kind of eurozone facility that member countries in the euro zone can turn to recapitalize struggling banks and also share in the cost when those banks go bust. As it stands right now, there really isn’t a whole lot of integration across different banks within the eurozone and between different countries within the eurozone.
Vanek Smith: Today we’ve gotten word that borrowing costs in Spain are on the rise to almost unsustainable levels. Could a union like this help that situation?
Werth: It could in theory. What it could help is to prevent — you have these individual countries that might be having financial trouble of their own from having to go in and throw their own money at their banks, you know they don’t have that kind of money. The key country here is Spain, everyone is watching Spain right now. Spain is faced with the prospect of injecting capital into its banks — we’ve heard of Bankia for example. And that’s money it doesn’t have. And that in turn makes investors nervous causing Spain’s borrowing costs to rise. And presumably, a banking union would help prevent that kind of vicious spiral.
Vanek Smith: Christopher Werth in London, thank you.
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