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Business Daily: Banking disunion 

Banking disunion 

26/06/2012

Banking disunion

BBC World Service - Business Daily, Banking disunion

Why Finland will torpedo the latest proposal to solve the eurozone crisis: banking union

Why Finland plans to torpedo the latest proposal to solve the eurozone crisis: banking union. Plus, how fuel subsidies are as addictive as heroin - but mean you stay cool even on the hottest days.

The intricacies of European banking union are not - let's be honest - everyone's cup of tea. It can seem rather an arcane subject but banking union is reckoned by many to be one of the keys to solving the eurozone crisis.  

It is likely to be the central issue at the eurozone summit later this week.  

The idea is that eurozone states would pool their resources to collectively act as the guarantors of the eurozone banks. So, if a bank goes bust, then all the eurozone governments would help cover any losses.   

The problem is that some eurozone members regard this as a covert way of requiring them to underwrite the questionable lending practices of banks in other member states.  

It sounds to them suspiciously similar to the pooling of responsibility that "eurobonds" would represent. Those are government bonds issued - and backed - by the entire eurozone.  

The most high profile opponent of banking union and eurobonds is Germany but fellow eurozone nation Finland takes a very similar position. Justin Rowlatt asks Finland's Minister for Economic Affairs Jyri Hakamies, why the country is taking such a tough stand.

This week the programme is looking at education and the money behind it in our series on The Knowledge Economy. 

The BBC's Sean Coughland reports from Italy where one university is planning to do something very un-Italian - it's going to start teaching all its courses in English.  

Plus, many countries are struggling with the challenge of weaning the public off subsidised fuel. It can be very tricky, as many countries - including Taiwan - are discovering.  That's because fuel subsidies are like an addictive drug.  

When a country first introduces them they feel good, they cut costs for ordinary people - voters - and can give a very pleasant jolt to economic growth. The problem is they very quickly become extremely expensive, especially if fossil fuel prices rise rapidly as they have in recent years.  

Of course, by the time governments realise they need to lower the cost, it is too late - voters are hooked. As Cindy Sui reports from Taipei for this week's Asia Business Letter.

(Image: Euro money notes being handed over)

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