Banking union made easy: a five-minute guide to the EU's new rules

A banking union is being set up by the EU to help keep Europe's financial system stable and prevent another crisis from taking place. It requires finding a fast and efficient way to deal with failing banks while ensuring that taxpayers are spared from paying for bankers' mistakes. As MEPs prepare to vote on 15 April on an agreement with the Council on how to deal with failing banks, we take a closer look at the issues involved. Read on for an overview of how banking in Europe is about to change.


The key ingredients for a banking union

An efficient banking union requires legislation on how to deal with failing banks, protect small depositors and better supervise banks.

Why states keep bailing out failing banks...

Because banks are at the heart of the economy, drawing in deposits, savings and financing investments, their health is of paramount importance. If they get into serious trouble, governments usually opt to bail them out with taxpayers’ money, even if that means a sharp increase in public debt, rather than risk economic meltdown in the wake of bank failures.

...And how to prevent this from happening again

Banking legislation is being reformed in order to prevent countries from using taxpayers' money to shore up failing banks. On 15 April MEPs vote on a deal that would enable authorities to quickly deal with failing banks. For this they would be able to rely on a €55 billion bank-financed fund rather than resorting to taxpayers' money.  Most importantly, bank losses will have to be borne mostly by shareholders and bondholders, giving them more incentive to  protect taxpayers and control bankers' risk taking..

Protecting people's savings

In order to safeguard people’s savings, MEPs will also vote on 15 April on an update of the deposit guarantee scheme directive, which introduces national bank-financed guarantees for savings up to €100,000.

Deposit guarantee schemes are being managed at the national level instead of at the European level.

Better supervision of banks

The Parliament  already supported the establishment of a single supervisory mechanism back in September 2013. This gives the European central bank (ECB) the responsibility to supervise the euro zone’s biggest banks. This will help to identify problems sooner and take care of them efficiently.

Other improvements

The EU also adopted legislation to limit banker bonuses in order to discourage them from taking excessive risks that could take down a bank.

Banks are now also required to hold sufficient capital in order to weather financial difficulties.
 [europarl.europa.eu]
14/4/14

Gas supplies may be affected, Putin warns Europe. -- Russia may begin requiring advance payment for natural gas from Ukraine

President Vladimir Putin on Thursday sent a letter to EU leaders, expressing his "extreme concern" over Ukraine's debt for Russian gas and warning them that supplies to Europe may be affected, his spokesman said.

"Indeed, such a letter signed by Putin was today delivered to heads of state of Eastern and Western Europe through diplomatic channels," Putin's spokesman Dmitry Peskov told the state RIA Novosti news agency.

"Putin expresses extreme concern over the critical situation around Ukraine's debt and supplies of Russian gas related to it," Peskov said.

• The letter, sent after a government meeting on Wednesday, contains a number of proposals on how to settle the situation, Peskov said.

"The proposals are aimed at taking urgent measures, since (a solution to) the situation cannot be delayed," he said, declining to be more specific.

The Interfax news agency, citing Peskov, said Putin had proposed "dialogue mechanisms to urgently discuss the situation."

"The complicated situation indeed may negatively affect the transit of Russian gas via Ukraine," Peskov was quoted as saying.

• Putin on Wednesday warned that Russia may begin requiring advance payment for natural gas from Ukraine, which has accrued $2.2 billion in unpaid energy bills, according to Russian natural gas giant Gazprom.

He added that it was "strange" that EU countries, while supporting the new authorities in Kiev "are doing nothing to support Ukraine."

"This situation cannot last indefinitely," he has said. Earlier this month, Gazprom announced it was raising the price of gas exports to Ukraine by more than a third, scrapping a previous discount amid soaring political tensions between the two ex-Soviet countries.

Ukraine now has to pay $485 dollars for 1,000 cubic metres of gas, the highest price of any of Gazprom's clients in Europe.

End-of-the-year haggling over energy prices has become a familiar problem in ties between Russia and Ukraine, with Moscow cutting natural gas to Ukraine and disrupting transit supplies to Europe in the past.

Ukraine maintains that Russia is punishing Ukraine for its Western ambitions and has threatened to take Moscow to court. 
[indiatimes.com]
10/4/14
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• The full text of the letter, published on Tuesday:

Ukraine’s economy in the past several months has been plummeting. Its industrial and construction sectors have also been declining sharply. Its budget deficit is mounting. The condition of its currency system is becoming more and more deplorable. The negative trade balance is accompanied by the flight of capital from the country. Ukraine’s economy is steadfastly heading towards a default, a halt in production and skyrocketing unemployment.
Russia and the EU member states are Ukraine’s major trading partners. Proceeding from this, at the Russia-EU Summit at the end of January, we came to an agreement with our European partners to hold consultations on the subject of developing Ukraine’s economy, bearing in mind the interests of Ukraine and our countries while forming integration alliances with Ukraine’s participation. However, all attempts on Russia’s part to begin real consultations failed to produce any results.
Instead of consultations, we hear appeals to lower contractual prices on Russian natural gas – prices which are allegedly of a “political” nature. One gets the impression that the European partners want to unilaterally blame Russia for the consequences of Ukraine’s economic crisis. Right from day one of Ukraine’s existence as an independent state, Russia has supported the stability of the Ukrainian economy by supplying it with natural gas at cut-rate prices. In January 2009, with the participation of the then-premier Yulia Tymoshenko, a purchase-and-sale contract on supplying natural gas for the period of 2009-2019 was signed. That contract regulated questions concerning the delivery of and payment for the product, and it also provided guarantees for its uninterrupted transit through the territory of Ukraine. What is more, Russia has been fulfilling the contract according to the letter and spirit of the document. Incidentally, Ukrainian Minister of Fuel and Energy at that time was Yury Prodan, who today holds a similar post in Kiev’s government. The total volume of natural gas delivered to Ukraine as was stipulated in that contract during the period of 2009-2014 (first quarter) stands at 147.2 billion cubic meters. Here, I would like to emphasize that the price formula that had been set down in the contract had NOT been altered since that moment. And Ukraine, right up till August 2013, made regular payments for the natural gas in accordance with that formula. However, the fact that after signing that contract, Russia granted Ukraine a whole string of unprecedented privileges and discounts on the price of natural gas is quite another matter. This applies to the discount stemming from the 2010 Kharkov Agreement, which was provided as advance payment for the future lease payments for the presence of the [Russian] Black Sea Fleet after 2017. This also refers to discounts on the prices for natural gas purchased by Ukraine’s chemical companies. This also concerns the discount granted in December 2013 for the duration of three months due to the critical state of Ukraine’s economy. Beginning with 2009, the sum total of these discounts stands at 17 billion US dollars. To this, we should add another 18.4 billion US dollars incurred by the Ukrainian side as a minimal take-or-pay fine. In this manner, during the past four years Russia has been subsidizing Ukraine’s economy by offering slashed natural gas prices worth 35.4 billion US dollars. In addition, in December 2013, Russia granted Ukraine a loan of 3 billion US dollars. These very significant sums were directed towards maintaining the stability and creditability of the Ukrainian economy and preservation of jobs. No other country provided such support except Russia. What about the European partners? Instead of offering Ukraine real support, there is talk about a declaration of intent. There are only promises that are not backed up by any real actions. The European Union is using Ukraine’s economy as a source of raw foodstuffs, metal and mineral resources, and at the same time, as a market for selling its highly-processed ready-made commodities (machine engineering and chemicals), thereby creating a deficit in Ukraine’s trade balance amounting to more than 10 billion US dollars. This comes to almost two-thirds of Ukraine’s overall deficit for 2013. To a large extent, the crisis in Ukraine’s economy has been precipitated by the unbalanced trade with the EU member states, and this, in turn has had a sharply negative impact on Ukraine’s fulfillment of its contractual obligations to pay for deliveries of natural gas supplied by Russia. Gazprom has no intentions except for those stipulated in the 2009 contract, nor does it plan to set any additional conditions. This also concerns the contractual price for natural gas, which is calculated in strict accordance with the agreed formula. However, Russia cannot and should not unilaterally bear the burden of supporting Ukraine’s economy by way of providing discounts and forgiving debts, and in fact, using these subsidies to cover Ukraine’s deficit in its trade with the EU member states. The debt of NAK Naftogaz Ukraine for delivered gas has been growing monthly this year. In November-December 2013 this debt stood at 1.451,5 billion US dollars; in February 2014 it increased by a further 260.3 million and in March by another 526.1 million US dollars. Here I would like to draw your attention to the fact that in March there was still a discount price applied, i.e., 268.5 US dollars per 1,000 cubic meters of gas. And even at that price, Ukraine did not pay a single dollar. In such conditions, in accordance with Articles 5.15, 5.8 and 5.3 of the contract, Gazprom is compelled to switch over to advance payment for gas deliveries, and in the event of further violation of the conditions of payment, will completely or partially cease gas deliveries. In other words, only the volume of natural gas will be delivered to Ukraine as was paid for one month in advance of delivery. Undoubtedly, this is an extreme measure. We fully realize that this increases the risk of siphoning off natural gas passing through Ukraine’s territory and heading to European consumers. We also realize that this may make it difficult for Ukraine to accumulate sufficient gas reserves for use in the autumn and winter period. In order to guarantee uninterrupted transit, it will be necessary, in the nearest future, to supply 11.5 billion cubic meters of gas that will be pumped into Ukraine’s underground storage facilities, and this will require a payment of about 5 billion US dollars. However, the fact that our European partners have unilaterally withdrawn from the concerted efforts to resolve the Ukrainian crisis, and even from holding consultations with the Russian side, leaves Russia no alternative. There can be only one way out of the situation that has developed. We believe it is vital to hold, without delay, consultations at the level of ministers of economics, finances and energy in order to work out concerted actions to stabilize Ukraine’s economy and to ensure delivery and transit of Russian natural gas in accordance with the terms and conditions set down in the contract. We must lose no time in beginning to coordinate concrete steps. It is towards this end that we appeal to our European partners. It goes without saying that Russia is prepared to participate in the effort to stabilize and restore Ukraine’s economy. However, not in a unilateral way, but on equal conditions with our European partners. It is also essential to take into account the actual investments, contributions and expenditures that Russia has shouldered by itself alone for such a long time in supporting Ukraine. As we see it, only such an approach would be fair and balanced, and only such an approach can lead to success.

*The letter is addressed to the leaders of 18 countries: Moldova, Romania, Turkey, Hungary, Slovakia, Slovenia, ***F.Y.R.O.M., Czech Republic, Poland, France, Germany, Croatia, Bosnia and Herzegovina, Greece, Serbia, Bulgaria, Austria and Italy.MOSCOW, April 10 (RIA Novosti) 
--
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 ***[GREECE recognized this country with the name "FYROM"]

[UN  resolution A/RES/47/225 of 8 April 1993]--

Europe’s economic and financial outlook and its social impact, growth and banking sector issues on the agenda of the Informal ECOFIN meeting

The two-day informal meeting of the ECOFIN, as well as the 13. Joint ECOFIN / FEMIP Ministerial Meeting, organized by the Geek Presidency in Athens on 1-2 April had a full agenda and Ministers were able to exchange views on a number of key issues affecting Europe’s economy and financial situation.
In particular, Europe’s social problems and their implications for economic growth were discussed, based on a research and policy paper presented by Bruegel, which confirms the link between poverty and unemployment on the one hand and economic growth on the other. There was a fruitful discussion on how fiscal sustainability is negatively affected by social problems, as well as on concrete measures to be taken to address persistent unemployment and social insecurity, which constitute a major problem for the EU.

In conjunction with Central Bank Governors of Member States, Ministers discussed the economic outlook, growth prospects and financial stability in the EU. The discussions highlighted that the macro-economic situation is improving, but that complacency should be avoided. Sustainable growth, growth that tackles unemployment and social challenges will continue to depend on growth-friendly fiscal consolidation and structural reforms.
Furthermore, a very fruitful and constructive discussion and exchange of views took place based on the Commission Communication on long term financing of the economy (adopted on 27 March) and on the High-Level Experts Group (HLEG) Report on SME and Infrastructure financing of 11 December 2013. In this context, Ministers took stock of public and private initiatives at national level to improve access to capital markets, in light of the HLEG final recommendations and examined outstanding issues and public responses both at EU and national levels.
As far as the Preparation of the IMF/World Bank Spring Meetings and the G20 Finance Ministers Meeting on 10-11 April in Washington is concerned, the EU Terms of Reference were endorsed along with the International Monetary and Finance Committee (IMFC) Statement, which focuses on the economic situation and outlook, policy challenges to strengthening economic recovery in the European Union, progress in financial regulation, and specifically IMF policy issues.
On the issue of banking structural reform, Ministers had the opportunity to hear a comprehensive presentation by the Commission on its proposal on banking structural measures improving the resilience of EU credit institutions. This was the first opportunity for Ministers to listen to the Commission, as well as to the Chair of the High-level Expert Group on Bank Structural Reform, Erkki Liikanen. Before kick-starting the regular legislative work, the Presidency deemed it useful to have an exchange of information and views on this very innovative legislative proposal. A close examination of the legislative initiative will be starting under the Greek Presidency, with meetings planned at working party level, but the work will definitely go well beyond the current semester.
There was also an exchange of views about the state of play on the implementation of the Single Supervisory Mechanism, on the basis of an update by the Chair of the ECB's Supervisory Board, Ms Danièle Nouy. The ECB is now steering Phase II of the Asset Quality Review. This AQR exercise will be crucial to deliver a thorough assessment of the degree of soundness of our banking system, especially within the SSM. For that purpose, stress tests will be an essential complement to the AQR. The detailed methodology for the stress tests will be published only later this month.
All in all, there was a good exchange on the SSM implementation, and there was a strong interest in following-up on this exchange when we may take stock of further major developments later in the year.
Ministers had a sort of “stock-taking” exchange on the EU’s Banking Union and on the Single Resolution Mechanism in particular, mainly on the way forward following the agreement reached by the Greek Presidency on this key file.
Moreover, interesting and fruitful discussions took place at the 13th Joint ECOFIN / FEMIP Ministerial Meeting, co-chaired by ECOFIN President, Yannis Stournaras, and Werner Hoyer, President of the European Investment Bank, in presence of EIB Vice-President Philippe de Fontaine Vive. Discussions focused on the challenges and levers for sustainable growth and the new strategy of the European Investment Bank (EIB) for the Mediterranean: “Roadmap 2020”. Fostering growth and job creation, especially for young people, was a key aspect.
At the press conference, following the conclusion of the two days’ sessions, ECOFIN President Yannis Stournaras highlighted also recent provisional political agreements reached by the Greek Presidency on the Payments Account Directive (PAD) and on the Regulation on Key Information Documents - Packaged Retail and Insurance-based Investment Products (KID - PRIIPs):
“The agreement on Payments Account Directive (PAD) is an important milestone for the deepening of the internal market and the reinforcement of competition in the financial services to the benefit of consumers”, he said.
On the KID - PRIIPs agreement, Minister Stournaras noted that it enhances investor confidence and protection: “We expect that this new approach of consumer-friendly rules on standards for information about these products will contribute to restoring confidence of investors in the markets, which we consider essential for ensuring sustainable economic growth in the coming years”.
In his overall assessment of the Informal Eurogroup and ECOFIN Meetings in Athens, Finance Minister Yannis Stournaras stated:
“I am very pleased. We had very interesting discussions on the economic and financial situation, as well as on the financing of the SMEs”, the backbone of the European economy.
[gr2014.eu]
2/4/14

Greece to end free police protection for rich. Τhey will have to pay 2,000 euros ($2,650) per month for each officer acting as a bodyguard

Wealthy Greeks fearing attacks by anarchist groups will no longer be entitled to free police bodyguards in the latest cost-cutting plan from a government trying to meet budget targets set by international creditors.
The Public Order Ministry said on Tuesday that individuals with a net income of more than 100,000 euros ($132,500) a year will have to pay for their own police protection from potential terrorist and organised crime attacks. 

 Under the plan, they will have to pay 2,000 euros ($2,650) per month for each officer acting as a bodyguard and a daily fee of 50 euros for use of a patrol car.


The new pay-for-protection scheme still needs to be signed off by the Finance Ministry and will not include elected officials, judges, or public sector executives. Private citizens currently receiving police protection include prominent businessmen and journalists who have been repeatedly threatened by anarchist groups, though few of the warnings have been specific.
But there has been a resurgence of attacks lately amid growing public hostility toward those, whether in the public or private sector, seen as corrupt and incompetent and blamed for Greece's economic crisis.
It is the latest in a series of austerity measures that the Greek government has had to enact in recent years in return for bailout cash to avoid bankruptcy. However, the spending cuts and tax increases have come at a heavy cost to the Greek economy.

The country is in its sixth year of recession and the country's unemployment rate has spiked to over 25 percent.

The ministry declined to make any immediate comment on the number of officers involved in security details and the projected amount of money that would be saved.
"We must be careful this measure does not backfire ... There is a concern that we get to a point when someone with enough money can buy his own security, and someone who does not will be left more exposed," the head of the Greek Police Officers' Association Christos Fotopoulos told the Associated Press.
Last month, an armed group named Informal Anarchist Federation, which has links to other European armed groups, claimed responsibility for a series of parcel bomb attacks this year, one targeting the former director of the police's anti-terrorism division.
"The cops, the judges, journalists, politicians and washed-out anarchists thought they had gotten rid of us," the group said in a statement posted on the Internet. "This is a punch in the stomach to them, because urban guerrilla warfare is back and it will crush all their aspirations".
In a report on Monday, bailout monitors from the European Union pressed Greece to speed up cost-cutting reforms, including extensive public sector staff cuts, and announced that emergency taxes that have drastically cut into consumer spending are likely to be extended for another year, through 2016.
 http://www.aljazeera.com
30/7/13