Bank bailouts in EU could reach 16% of GDP: Study

European nations need to find a credible exit strategy for their public finances as the aid shelled out to shore up banks can reach 16.5% of GDP, an EU report warned. In its annual report on public finances, the EC estimated direct fiscal costs of the current crisis in the EU anywhere in a broad band from 2.75% to 16.5% of GDP. Which end of the estimate final figure veers towards depends partly on how well governments manage to recover their cash injections & loans, the commission said.Rising public debts and planning by gov'ts. to support the financial sector, together with likely rise in spending on aging populations & slowing growth raise concerns on public finance sustainability, it said. Therefore exit strategy strengthening fiscal policy frameworks, reforming age-related spending & spelling out broad consolidation measures envisaged when the recovery's taken hold is required," it said. The report, which examines the budgetary costs of the banking crisis, showed that 49 crises since 1970 around the world resulted in net direct fiscal outlays worth an average of 13% of GDP to revive the banking system. "Experience shows the costs were low when the banking crisis resolution strategy was implemented swiftly; was transparent and received broad political support," the EU exec stressed.