Remember The Spanish Banks' Bailout Conditions? They're The EU's New Standard

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Spain is the latest victim of the euro zone crisis. Fitch Ratings downgraded 18 Spanish banks on Tuesday.
German exports and investments fell in the first quarter as French exports declined, too, for the second quarter in a row.

 

Before they received a 37 billion euro ($48 billion) taypayer-funder bailout last November, four Spanish banks were forced to agree to lay off thousands of employees and close offices – a major blow to shareholders and bondholders who hoped for a soft knuckle-rapping.

Now, the European Union is making those rules standard.

Officials in Brussels are set to impose stricter conditions for bailouts, requiring a greater level of “burden sharing” with shareholders and junior creditors paying into the rescue package. Bank restructuring plans must be approved by EU officials, too, according to the Financial Times.

The move comes as EU leaders fear that an uneven approach to bailouts – in which more stringent rules apply to more desperate, southern European debtors – could drive up the cost of borrowing as investors flock to AAA-rated countries like Germany or Finland.

The new bailout conditions do not go as far as they did in Cyprus, though, where senior bondholders and uninsured depositors took a hit.

Slovenia appears to be the next European country to require assistance. The tiny Eastern European nation’s credit rating was downgraded twice in the last month, stirring fears that its troubled banks will need a financial boost.

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