Speaking to a European Commission conference in Brussels, Strauss-Kahn said existing schemes for dealing with failed cross-border banks have proved inadequate. “Europe needs a fire brigade,” said Strauss-Kah. The proposed European Resolution Authority would be equipped with the tools to deal with failed banks in a cost-effective way. This approach would make sure that losses are borne by shareholders and holders of equity, and by uninsured creditors.  As much as possible, the system should be pre-financed by the banking industry, including through deposit insurance fees and any levies on financial institutions.

Strauss-Kahn also said the IMF is putting together proposals on ways to tax the financial sector, which will be presented to the G-20 group of advanced and emerging economies in April.

Central bankers can continue to ease monetary policy even when interest rates are at zero, and should do so if they sense the threat of deflation, a member of the European Central Bank's Governing Council said on Saturday. "The degree of monetary policy ease should be associated with the level of real interest rates, not nominal interest rates," said Orphanides, who also is governor of the Central Bank of Cyprus. "Near-zero policy rates that may be considerably expansionary in an economy with high inflation could be contractionary when inflation is too close to zero, or worse, deflation has set in."

The European leaders failed to agree on the introduction of a levy on financial trading to compensate taxpayers for bank bailouts at the Spring Council meeting of the European Union (EU), which concluded March 26. The Heads of State or Government of 27 nations stressed instead that they must reach an agreement before the G20 Summit June 26-27 in Toronto. It was mentioned that the EU should take the initiative at forums such as the G20 where it should strongly defend its positions regarding regulation and the fight against climate change.

Ahead of the Spring Council meeting, Dominique Strauss-Kahn, the managing director of the IMF, said March 17 that a tax on financial transactions to help pay for bailouts of failed banks would be difficult to devise and easy to avoid. Strauss-Kahn will present the G20 group of leading countries his proposals on how to make banks rather than taxpayers pay for bailouts using either a tax on transactions or a levy on a bank's balance sheet.

Germany and France have pushed for a 'Tobin'-style tax on transactions as a way to raise money for developing countries and dampen volatility in foreign exchange markets. According to EurActiv, The United States and Canada have said they will not introduce a financial transaction tax. UK Prime Minister Gordon Brown stated in February 2010 that the idea of a levy on banks was gaining ground, diluting his initial support for a transaction tax in 2009.

German leader pushes for tougher currency regime. Angela Merkel, agreed for the first time yesterday on a "last-resort" rescue package for debt-stricken Greece, while pushing for a tough new regime of sanctions and penalties against European single currency countries whose fiscal misconduct endangers the euro.

The Merkel-Sarkozy document goes further than the immediate Greek crisis, representing a German attempt to rewrite the rule book for the euro and forestall the possibility of a bigger single currency emergency. "The agreement describes the conditions under which the EU and the IMF will intervene and beyond," said a French official.