Germany and UK reject proposal for ‘non-euro’ firewall

Germany and the UK have rejected a European Commission proposal to turn a €50bn rescue fund into a bank backstop for member states outside the eurozone.

The European Union’s balance-of-payments fund currently has about €40bn available, after being used to help Latvia, Hungary and Romania. The commission wants to overhaul the fund and add a tool for bank aid that could be tapped by non-euro countries whose lenders fail next year’s continent-wide stress tests.

Both Germany and Britain say the balance-of-payments mechanism isn’t intended for recapitalising lenders. Officials in Berlin and London also said it may ease pressure on countries that need to strengthen their banking industries.