Ailing European banks 'should receive help directly'

19 June 2012

Reforms could be made to the way in which European institutions help ailing banks in the future.

That is according to Jose Manuel Barroso, president of the European Commission (EC), who believes that implementing a system whereby struggling financiers can be helped directly could be beneficial to both parties.

Speaking before the summit of G20 leaders got underway in Mexico yesterday (18 June), Mr Barroso indicated that the link between indebted sovereigns and banks needs to be broken sooner rather than later.

With this in mind, he noted that central institutions should be able to provide companies with emergency funding directly, as opposed to handing it to governments to recapitalize financiers.

He stated that the EC would "certainly" favour such an arrangement as it would restrict the likelihood of debt contamination and contagion.

"We believe that [the current system] is one of the issues that can have a negative impact in terms of market reaction," he added.

By Asim Shah

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