The European Commission has been considering the possibility of direct bank recapitalization by the eurozone's ESM bailout fund, though this is not possible under the current treaty, its top economics official said on Monday.
"We have been considering this as a serious possibility, of breaking the link between the sovereigns and the banks," EU Economic and Monetary Affairs Commissioner Olli Rehn told a news briefing.
"This is not part of the ESM (bailout fund) treaty for the moment, in its present form, but we see that it is important to consider this alternative of direct bank recapitalization as we are now moving on in the discussion on the possible ways and means to create a banking union," Rehn said.
"The key issue is to be able to break the link between the banks and the sovereigns so that we can go to the roots of this current debt crisis."
French Finance Minister Pierre Moscovici said on Monday that Paris backed the idea of an integrated system across Europe for supervising the banking sector and of using the eurozone's ESM bailout fund to recapitalize struggling banks.
"We are in favor of this banking union," Moscovici told a news conference flanked by EU Economic and Monetary Affairs Commissioner Olli Rehn.
Moscovici also said the new French government was committed to meeting a previously established goal to rein in the public deficit to within the EU limit of 3 percent next year. He said this could be achieved without austerity measures.
"This is a firm commitment for (President) Francois Hollande. We take very seriously the budget credibility that the European Commission is asking of us."
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