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EU agrees on bank failure rules to avoid bailouts

Juergen Baetz, Associated Press

German Finance Minister Wolfgang Schaeuble speaks at a press conference about the German budget in Berlin, Germany, Wednesday, June 26, 2013. The government of Europe biggest economy finalized the budget for 2013 and the budget plan for 2014. (AP Photo/Markus Schreiber)

BRUSSELS (AP) -- A diplomat says the European Union has struck a deal on joint rules establishing who will pay for bank bailouts in the future without having taxpayers foot the bill.

The agreement is an important step forward in establishing Europe's so-called banking union to restore financial and economic stability to the recession-hit bloc.

The diplomat says the EU's 27 finance ministers reached the agreement after seven hours of negotiations early Thursday. He declined to be named pending the official announcement.

The set of rules determines the order in which investors and creditors will have to take losses when a bank is restructured or shut down, with a taxpayer-funded bailout being only a limited last resort possibility.

The EU governments will now start negotiating the legislation with the European Parliament.