Has the ECB changed its tune?

Is burden sharing with senior bank bondholders back on the agenda? Reports in the Wall Street Journal over the weekend suggest a major U-turn on this policy from the European Central Bank. According to the piece ECB President Draghi articulated the position at last week's EcoFin meeting when discussing options for the recapitalisation of the Spanish banking system, with such a policy only to be employed when a bank is pushed into liquidation. It is reported that the proposal was rejected by finance ministers in the interests of financial stability. If the story is true it will not go down too well in Ireland. During the original negotiations on Ireland's programme Irish officials argued for burden-sharing with senior bondholders to ease the cost to the taxpayer. This was flatly rejected by the ECB in particular. Recently, the ECB has publicly stated that such a policy was insisted upon to protect against spill over into other Irish and European banks. Although Draghi has had a very different style to that of Trichet since he became ECB President, this would represent a very fundamental shift and one that would have very important ramifications.