European support for troubled banks is a last resort laid bare what has long been an open secret in Brussels: promises to create a euro zone backstop for banks may never be fulfilled.
Designed to secure a level playing field in the euro zone and prevent vulnerable countries having to contain financial problems alone, a European banking union was one of the biggest political commitments made to underpin the euro.
Comments from the head of the Eurogroup of finance ministers this week that countries which encounter bank problems may have to cope alone, however, underscore resistance to delivering on last year's promise.
"Strengthen your banks, fix your balance sheets and realise that if a bank gets in trouble, the response will no longer automatically be that we'll come and take away your problem," Jeroen Dijsselbloem told Reuters.
"We're going to push themback," the Dutch Finance Minister said shortly after announcing a bailout of Cyprus that forced the closure of the country's second-biggest bank and imposed huge losses on big depositors.
"That's the first response we need. Push them back. You deal with them."
His candid remarks, described by one EU official as "not the most brilliant thing to say", clashed with a commitmentby euro zone leaders to club together when banks fail. They irritated many in Brussels, used to gentler diplomacy.
The comments also grated in Dublin, which still hopesthe euro zone will stand by a pledge to allow its rescue fund, the EuropeanStability Mechanism, to recapitalise banks directly.
Bailed out by European countries and expected to resume normal borrowing on markets this year, Ireland wants direct assistance available for its banks should they get in trouble again to avoid the risk of adding to the country's debt.
It is also hoping the ESM will assume some of the burden of big recapitalisations that have already taken place.
"The principle which was agreed in June was to break the link between sovereigns and banks and the clear understanding... is that the ESM ... of course will potentially be used forrecapitalisations," Ireland'sEuropean Affairs Minister Lucinda Creighton told Reuters. "That's the whole point."
The euro zone's three maintriple-A rated states, Germany, the Netherlands and Finland, said last year the ESM could only be used if trouble arose at banks under European supervision in future, leaving "legacy" problems to home countries.
BANK RUNS
Dijsselbloem appeared to go further when he said the aim should be "a situation where we will never need to even consider direct recapitalisation".
After remonstrations from several euro zone partners,he issued a statement clarifying that Cyprus was not a template but a special case.
Another euro zone source said the Dutchman, barely one month in the job, had got carried away by his enthusiasm and needed tolearn that, as head of the Eurogroup, "you must giveup on expressing personal opinions"
