Asmussen demands clarity on ‘bail-in’ creditor ‘pecking order’

Top European Central Bank official Joerg Asmussen warned Friday that the eurozone has to spell out a clear “pecking order” for creditor losses in future Cyprus-style “bail-in” debt rescues.

“Bailing-in itself is not a problem,” Asmussen said after talks with European Union finance ministers which formally approved last month’s controversial Cyprus bailout accord.

“(But you) must make clear to international investors the pecking order ... the rules of the game,” he told a press conference.

He said the hierarchy for who suffers losses from bondholders to depositors was clear in the United States and elsewhere.

After Cyprus, where the terms changed several times during arduous negotiations, Asmussen said this had to be done in the eurozone “so you do not put Europe at a disadvantage” compared with other major economies.

He added that it would be “preferable” if this was functioning from “2015 and not 2018”.

Asmussen pushed EU states to speed up a eurozone banking union seen by leaders as a lasting answer to the problems of the intertwined sovereign and banking debt crisis.

“We need to agree all elements of banking union - and I mean ALL elements,” he said.

This “should include bail-in provision from the outset,” he said. (AFP)