Photo Gallery The EU's Changing Approach to the Crisis
For years, the European Union has been doing all it can to prop up its ailing banks, with European taxpayers footing the bill. Cyprus has now shown that a different model might be possible. Many in Brussels would like to see investors, shareholders and large depositors bear a greater burden.
Across the euro zone, governments have ponied up trillions to prop up their ailing banks, including the Spanish bank of Bankia, pictured here.
Following the Cyprus deal, Euro Group head Jeroen Dijsselbloem said that it could become a model for future bailouts. He quickly backtracked, but he might be right.
Current efforts to prevent the common currency zone from falling apart have led to tension between Northern and Southern Europe. The debate over how to approach bank insolvencies could intensify the clash between banking centers such as Luxembourg and Londen with the rest of the EU.
Many in Europe have come to see Germany, and Finance Minister Wolfgang Schäuble, as the bogeyman. But many in Europe have come to the conclusion that bank investors and shareholders, in addition to their largest customers, must take part when financial institutions have to be bailed out.
During the tough negotiations over the Cyprus bailout deal, banks in the island nation remained closed for almost two weeks out of fear of capital flight. Should the EU change its approach, many fear that the entire common currency bloc could become less attractive to investors. Here, customers lining up to enter a branch of Laiki Bank in Nicosia on March 28, the day that banks in Cyprus reopened.
The European Parliament is currently trying to come up with rules specifying exactly which investors will be compelled to participate and in which order.
