EU finance ministers agree on seven-year budget ahead of summit

After weeks of negotiations, the European Commission and the European Parliament reached a final agreement on Thursday on the seven-year budget for the period 2014-2021. For the first time ever, the amount agreed — 960 billion euros — cuts real spending, due to the ongoing economic crisis.

The agreement — which was at risk of falling apart given the Parliament’s view that the concessions being made by the European governments were insufficient — will allow for the deployment of six billion euros earlier than planned for spending on schemes to combat youth unemployment.

The new deal, which will still have to be voted on by the European Parliament, came just hours before the start on Thursday of a summit of EU leaders in Brussels. There will be two key issues on the table for Spain at the meeting: measures to combat Spain’s huge youth unemployment rate, which is currently running at 56 percent, and help for small and midsized companies.

According to the new deal, the European Investment Bank will be tasked with ensuring that Spanish companies will not have to pay higher interest rates on loans than firms in other countries in the euro area. Brussels is due to come up with a project that will free up between 60 and 100 billion euros of credit over seven years.

In the case of Spain, the recapitalization of the banks has been considerably more favorable"

Meanwhile, late-night talks on Wednesday between finance ministers from the 27 EU countries finally yielded an agreement on future procedures in the case of bank bailouts, which will see shareholders have to absorb any losses before smaller savers and taxpayers do.

The agreement, which was being blocked by Germany, arrived just in time for the 27 ministers to sign before the summit got underway on Thursday. The final text was described by Spanish Economy Minister Luis de Guindos as “a step in the right direction” toward banking union.

The new rules will mean that a bank’s shareholders and creditors will be the first to take a hit in the case of a bailout, followed by savers with deposits greater than 100,000 euros. If that is still not sufficient, the government will be called in and taxpayers will have to help shore up the losses.

Speaking to the news agency Efe, De Guindos said that the bank rescue model that was agreed upon in the early hours of Thursday morning was stricter than the one that had been applied in the case of the bailout of Spanish banks, given that creditors will have to assume a higher percentage of losses.

“In the case of Spain, the recapitalization of the banks has been considerably more favorable than what has been agreed upon now for the rest of the countries,” De Guindos said.

Earlier this month, ministers agreed that the emergency bailout fund in the euro zone will be able to inject as much as 60 billion euros into troubled lenders, but the government of the country concerned will still have to bear some of the cost of the rescue, as will creditors and depositors.