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New Plan

EU set to unveil new plan to protect taxpayers from bank losses

New proposals aim to ensure that losses are borne by shareholders and creditors.

THE EUROPEAN COMMISSION is expected to announce a new set of proposals aimed at protecting taxpayer funding from failing banks.

The BBC reports that the new plan aims to protect taxpayers while ensuring that essential banking functions are maintained. Under the proposals, bank shareholders and creditors would bear the brunt of banking losses rather than taxpayers.

However, the new rules are unlikely to come into effect until at least 2014.

The Commission’s announcement comes amid increasing speculation that Spain will need financial support as its borrowing costs continue to rise, though Spain’s government insists it does not need international help.

Earlier today, the parliamentary leader of Angela Merkel’s party Volker Kauder said that he believes Spain will need support from the eurozone rescue fund, but said that under EFSF rules, the money can’t be given directly to a Spanish bank rescue fund.

Meanwhile, Moody’s downgraded several German and Austrian banks today. The ratings agency said that the risk of “further shocks emanating from the euro area debt crisis” was a key factor in the downgrade.

- Additional reporting by the AP

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