LUXEMBOURG (AP) — Europe made little progress Tuesday in its efforts to secure the region's stricken financial system and ensure that failing banks never risk an entire country's economy again when finance ministers from the 27-country European Union failed to agree on how a single banking supervisor should be set up.
A handful of countries made a small breakthrough at a meeting of ministers in Luxembourg, deciding to impose a tax on financial transactions in the hopes of curbing risky, speculative trades and perhaps even creating a fund that could be used to help banks in trouble. The 11 countries that support the tax still have to hammer out exactly how it will work and submit it for approval.
But the ministers were still blocked on larger issues of how the 17 countries that use the euro will move closer together economically and politically — something they all agree is vital to the future of their currency.
Spain's finance minister, Luis de Guindos, said that only bold action would remove fears for the eurozone and that only once those fears were removed would concerns subside about his own country, which many fear may need a bailout. Spain has been coming under pressure to take up the European Central Bank's offer of buying up a country's bonds to help keep its borrowing costs down. The ECB's offer comes with strict conditions and the Spanish government is working hard to make sure those conditions will not mean further austerity measures. The country has already asked for help for its banks.
De Guindos would not say if his country was preparing to ask for a full bailout, calling the issue "delicate".
"It's logical that if there are doubts about the future of the euro, all those countries that the markets are focused on shows this uncertainty on their spreads," he told reporters, referring to the difference in interest rates charged on a struggling country's bonds and the rate of a more financially secure country such as Germany.
Progress was slow as ministers continued to debate the fine points of how Europe's banks should be supervised and how much help they can be given by the European bailout fund.
Europe is in its third year of its financial crisis, brought on in part by overspending and excessive government debt. Recessions in several countries have worsened the problem, and EU leaders have struggled to solve the twin problems of too much debt and too little growth.
Banks have played a big role in creating the eurozone's financial crisis. The government debt the banks had bought up during the boom times of the eurozone is now no longer considered a safe bet and the banks are struggling to unload it — usually at hefty losses. Governments have been forced to step in to prop the banks up in many cases. But rescuing banks is expensive and has added to investors' concerns that European countries are simply spending too much.
The challenge now is to break this vicious cycle. Several countries want Europe's new permanent bailout fund — the European Stability Mechanism — to have the power to hand money to banks directly, rather than lending it through national governments as it does now.