Hollande: Use EU bailout fund to recapitalise banks

(BRUSSELS) - French President Francois Hollande called Thursday for the European Union to use its bailout fund to replenish directly the coffers of banks suffering from the eurozone debt crisis.

Speaking to reporters after an EU summit to thrash out ideas on tackling the crisis, Hollande said: "I took the position that banks could be recapitalised using the European solidarity mechanisms in liaison with the European Central Bank."

Ireland has requested the possibility for banks to apply for aid directly, and the head of the International Monetary Fund, Christine Lagarde, has also said she favours such an option.

However, the rules of the fund, the European Stability Mechanism, state that only nations may request aid, which then can be used to recapitalise banks.

Germany in particular is adamant that the current rules stand. First, the bank should try to solve its problems on its own, then apply to its government or another member state if that did not work, Berlin believes.

Spain's troubled banks are amongst the most urgently in need of fresh funds but premier Mariano Rajoy said ahead of the summit that Madrid could take care of its banks without recourse to EU aid.

Rajoy admitted that Spain's troubled banks would need recapitalising, but stressed that "to date the government has no interest and no intention of resorting to any European fund or institution".

Hollande also said that he and Italian Prime Minister Mario Monti had pushed for a more coordinated banking supervision system at European level.

In his closing statement, EU President Herman Van Rompuy said: "Colleagues expressed various opinions on issues such as eurobonds in a time perspective, more integrated banking supervision and resolution, and a common deposit insurance scheme."