EU to force banks to raise $148 billion

Associated Press

BRUSSELS

Big banks across Europe will have to raise $148 billion to better withstand the turmoil of the debt crisis, preliminary figures showed, while eurozone leaders neared a deal to boost their bailout fund to more than $1.4 trillion, a senior official said Wednesday.

The deal to force banks in the European Union to boost their rainy-day funds amid worsening market turmoil is a key part of a broader plan to solve the debt crisis that leaders have promised.

It was, however, only one- third of a broader strategy that is expected also to include reducing Greece’s debt load and boosting the eurozone’s bailout fund.

After much delay, talks on the bailout fund finally saw some progress. The leaders of the 17-country eurozone want to give the fund, the $611 billion European Financial Stability Facility, more firepower so it can stop the crisis from engulfing big countries such as Italy and Spain. The question was how to do it with the most impact and the least risk for taxpayers.

A senior eurozone official said that consensus was emerging to allow the EFSF to insure private investors against the first 25 percent of losses on purchases of government bonds and other investments linked to helping the eurozone.