Ireland’s IMF/EU Bailout. The Financial Crisis Has Not Gone Away
By: Christopher Quigley
Jan 19, 2011
(Reuters: 18th. January 2011) -: “EU finance ministers agreed on Tuesday they wanted tougher stress tests for the region’s banks to restore confidence in the bloc’s financial system, but remained locked in dispute over how strict they should be.
“We discussed bank stress tests … and we are really agreed that the new stress tests should include more banks,” said German Finance Minister Wolfgang Schaeuble.
“This is the clear position of the German government but also most of the others, and we should try to avoid that which happened last year,” he added, commenting on July tests, branded irrelevant after they gave Irish banks a clean bill of health.
Michel Barnier, the European Commission official attempting to broker a deal with the EU’s 27 countries on how the checks would work, highlighted continued disagreement on how this should be done. “We need to have more time to work on this,” he said.
“We do need a few days on the issue of liquidity to see whether or not to go further on the question of sovereign risk,” he added, flagging the most contentious point in the debate — whether or not the taboo subject of a default on debt in Greece, for example, should be one of the test scenarios for banks.
Ministers also failed to reach a final decision on whether banks should be tested for a liquidity crunch to predict whether they could tough out borrowing difficulties should markets freeze.
A diplomat from Hungary, which currently holds the EU presidency, said ministers were near agreement on testing liquidity, even though no formal decision had been made.