German Finance Min : Expect Govts to Have Final Liability on Future Bank Recaps
07/09/2012| 10:18pm US/Eastern
(Updates with further Schaeuble comments)
By Tom Fairless and Andreas Kissler
BRUSSELS--German finance minister Wolfgang Schaeuble insisted Tuesday that final liability for banks' debts should remain with national governments even after the euro zone's rescue funds are empowered to recapitalize banks directly.
"We expect that the final liability of the state will remain" even once direct recapitalizations exist, Mr. Schaeuble told journalists at a press conference here.
"The memorandum is always agreed with member states, and with no one else," he said.
At their summit last month, EU leaders agreed to empower the bloc's rescue funds to intervene directly to recapitalize banks in an effort to break the link between sovereigns governments and banks.
"This has nothing to do with sharing liabilities," Mr. Schaeuble said.
Despite insisting that member states would maintain the ultimate liability, Mr. Schaeuble said it was important nonetheless "to tell markets that there will one day be the possibility" of direct bank recapitalizations.
But he said "we mustn't create higher expectations than we can fulfill."
Mr. Schaeuble said he assumes the Eurogroup won't make a decision on Greece and Cyprus before September.
Greece has a EUR3.1 billion bond maturing August 20 that is held by the European Central Bank.
Turning to the Eurogroup's plan to provide financial assistance for Spain's banks, Mr. Schaeuble said parliaments could start debating the bailout package for Spain's banks without giving a final figure for the size of the bailout.
"We won't specify every detail on capital needs in the memorandum beforehand," Mr. Schaeuble said.
The Eurogroup announced last month that it would provide Spain with up to EUR100 billion to recapitalize its banks.
Write to Tom Fairless at email@example.com