EU warns of further banking bailouts

13 July 2010

European governments should be prepared to provide emergency funding for banks which run into trouble if the economic crisis worsens, an EU finance chief has suggested.

Analysts are keenly awaiting the findings of recent stress tests carried out on 91 of the continent's major financial institutions, which will indicate how much banking firms could lose in the event of a renewed economic downturn.

"It is clear to my mind that the stress test exercise is of paramount importance to restore confidence in the European economy," said EU economy commissioner Olli Rehn told AFP. "In my view, the European banking sector is overall resilient."

He added that continental politicians should brace themselves for "pockets of vulnerability" amid concerns that the recent rebound could yet transform into a full-blown double-dip recession.

Mr Rehn's comments came after National Australia Bank boss Tom Vosa told Bloomberg Television that the £16.6 billion bailout fund currently under discussion would be "a drop in the ocean".

By Claire Archer

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