Business, Economics and Jobs

Bank and budget deals boost EU summit

BRUSSELS, Belgium — European Union leaders opened their latest crisis summit Thursday boosted by breakthrough agreements on bank bailouts and the bloc's $1.3 trillion spending plan.

Hours before the presidents and prime ministers gathered in Brussels, their finance ministers struck a late-night deal designed to protect taxpayers from picking up the tab for failed banks.

"The agreement tonight marks a major milestone in our effort to break the vicious link between the banks and the sovereigns," said Irish Finance Minister Michael Noonan, who chaired the meeting.

The deal is designed to prevent a repeat of Ireland's disastrous banking collapse in 2009, when the government plunged the country into debt by pumping billions into failing banks.

The long-term impact of that bailout was underscored Thursday by the news that Ireland has slipped back into recession after four years of austerity designed to balance public finances.

The EU banking agreement came after 18 hours of failed negotiations last week. It’s seen as a key step to setting up an EU banking union and shoring up the financial system without forcing governments to keep failing banks afloat.

Instead, the bailout burden will fall on bank shareholders and savers with more than $130,000 in their accounts. The plan is based on the model used in Cyprus when it became the latest euro-zone country to suffer a financial meltdown in February.

Thursday's second EU deal concerns the bloc's long-term spending plan from 2014-2020. It's a compromise between the European Parliament, which wanted to boost spending and richer country governments led by Britain, and Germany, which was seeking cuts.

"This is an important day for 500 million citizens," declared Irish Prime Minister Enda Kenny after the deal which broke months of deadlock over the seven-year budget of around $1.3 trillion.

The plan will include a special $7.8 billion fund designed to tackle the bloc's soaring youth unemployment. EU leaders are expected to spend much of the remainder of the two-day summit working out how such programs can best be used to create jobs.

"I want this to be a summit that tackles youth unemployment, a summit for growth and jobs," French President Francois Hollande said as he arrived for the talks. "That's what Europeans expect."