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EU Strikes 2 Major Deals, Stumbles On Unemployment

Analysts have warned that the step will make little to no difference, and European Parliament President Martin Schulz called it a "drop in the ocean."

Leaders also called on the bloc's European Investment Bank to kick-start investment and job creation by boosting lending to small and medium-sized firms by up to 150 billion euros through until 2015. The increase in lending is made possible by a capital increase decided last year.


In the small hours of Thursday morning, European finance ministers reached a compromise on rules enshrining that bank rescues will be primarily funded by the banks' shareholders and creditors, with taxpayer money only a last resort. The new rules create certainty for investors and strengthen Europe's banking system.

The decision draws on the lesson of the 2008-2009 financial crisis when several European governments had to pump dozens of billions of taxpayers' money into their banks to stop the financial system from collapsing.

If a bank fails, losses will be forced on its shareholders, creditors and holders of uninsured deposits worth more than 100,000 euros to cover 8 percent of a bank's total liabilities. Then the government can chip in, as much as another 5 percent of liabilities â¿¿ but no more.


Analysts say restoring confidence in Europe's highly fragmented banking sector is one of the key policies to turn the tide on the 17-nation eurozone's debt crisis.

The plan was first endorsed by EU leaders a year ago when markets were worried that Spain â¿¿ like Greece, Ireland and Portugal before â¿¿ might be forced to seek a full-blown bailout to stay afloat after pumping billions into its ailing banks.

The plan consists of three main pillars: Centralized oversight of big banks anchored at the European Central Bank, a central authority able to prop up or wind down ailing banks, and a jointly guaranteed deposit insurance.

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