Fifteen European Union leaders met on Sunday in Paris to discuss a new set of actions aimed at confronting the financial crisis. The countries, which all share the euro currency (except UK, which has not adopted the medium of exchange) plan to announce hundreds of billions of dollars in new initiatives, designed to shore up their troubled banks and avert a feared market meltdown.
French President Nicolas Sarkozy – notes Bloomberg, host of the Paris summit of the 15 nations, told reporters at the Elysee Palace – he wanted Europe “to speak with one voice for Europe and for the world because this is a global crisis.”
British Prime Minister Gordon Brown, who was also in Paris for Sunday’s summit, warned that the stakes could not be higher for Europe. “At a time like this, said Brown, no country, not even the biggest can make it just on their own. We are all in it together and have to work to solve it together.”
According to a draft statement of the leaders’ meeting — the new proposed measures would seek to specifically address failures in present refinancing conditions. The 15 euro countries may also agree to guarantee interbank loans of as long as five years to break the credit-market freeze and take immediate actions in a concerted and coordinated manner to improve proper credit market functioning.
The head of the Eurogroup of euro-region finance ministers, Jean-Claude Juncker, said in a statement that “no financial institution of systemic importance” can be allowed to fail and that access to liquidity will be assured. No figures emerged from the Paris summit however, on Saturday, media reports suggested that Germany is readying a rescue package that could be worth up to 400 billion euros. Germany may also allot up to 100 billion euros to recapitalize private banks, and guarantees for interbank lending.
In London meanwhile, big British banks continue to remain in talks with government officials where a recapitalization plan may be announced as early as Monday. The plan, notes Bloomberg – includes the recapilatization of Royal Bank of Scotland Group and provide 250 billion pounds of bank loan guarantees.
World leaders are racing against the clock at this point, trying to come up with a rescue strategy for banks battered by the worst financial crisis in decades.
Paris summit marks also a shift in stance for many EU countries, including Germany, whose government earlier this month rejected French suggestions to form a joint bank- rescue fund. German Chancellor Angela Merkel said yesterday the euro region will implement “the same toolbox of instruments.”
While it is true that a European fund may help solve, or at least, for the time being help alleviate some of the pressure under which the financial system currently finds itself, it would certainly create many governance, and decision-making problems for most EU countries.