By Matina Stevis
BRUSSELS--Banking crises should be dealt with by making
bondholders forfeit part of their investment in struggling
financial institutions and euro-zone bailouts should only be used
in "rare and exceptional" cases, Finland's Prime Minister Jyrki
Katainen said in an interview Wednesday.
"Most future crises can be solved with bail ins," Mr Katainen
said. "We should separate public money from banking crises," he
added.
His remarks open a crucial euro-area debate over the next step
in the so-called banking-union project, which will see the creation
of a common rulebook on bank resolution to avoid burdening
taxpayers with bailout costs.
Ideas proposed for this include a euro-zone funded pool that can
be drawn on to restructure or unwind ailing banks and eventually a
euro-wide pot funded by the banks themselves. But Mr. Katainen said
he wasn't keen on either idea.
The Finnish premier, who was speaking to a small number of
reporters in Brussels, also said he was "not enthusiastic" about
extending the ability of the euro-area bailout fund to directly
recapitalize weak banks to "legacy assets."
He didn't exclude the mechanism being used for Ireland, which he
said has been exemplary under its bailout program, but he noted the
talks on the matter were ongoing.
Commenting on the tough negotiations between Cyprus and the
troika of European Commission, European Central Bank and
International Monetary Fund experts for a bailout package, Mr.
Katainen said Russia too could be involved in a rescue deal.
He also called for "the full truth" to come to light with regard
to allegations that Cyprus is rife with money-laundering
operations. Mr. Katainen further noted that the European Stability
Mechanism wouldn't be able to participate in a bailout for Cyprus
if the country's debt couldn't be seen to be restored to
sustainable levels in the medium-term.
Commenting on a much-anticipated speech by U.K. Prime Minister
David Cameron planned for Friday on the U.K.'s relationship with
the EU, Mr. Katainen said he was "really sad" that some Britons
felt it was preferable to leave the EU.
"The EU without the U.K. is like fish without chips," he said,
referring to the traditional U.K. dish. "It's not a real meal."
He added that the U.K. has stood to gain from its participation
in the European single market, and rejected claims that the EU
imposes regulations that build market rigidities and hamper
countries' competitiveness.
"Many other competitive economies like Germany's, Sweden's,
Finland's share these policies and they haven't harmed our
competitiveness," Mr. Katainen noted.
Write to Matina Stevis at matina.stevis@dowjones.com
