The EU and IMF leadership, along with Sarkozy, France and some US power brokers had pushed for a trans-national solution and a new international currency, and greatly strengthening the regulatory powers of the IMF. Evidently the European nations, like most of the American public, are still hung up on sovereignty. Consequently, the financial pressure will increase until the EU and the US are willing to accede.
Left: Nicolas Sarkozy
European Leaders Pledge to Continue Bailouts, Toughen Rules
Oct. 4 (Bloomberg) — European leaders pledged to continue bailing out their own nations’ banks, stopping short of a regional rescue effort, in response to the global credit crisis.
Leaders of France, Germany, Britain, Italy, Luxembourg, the European Central Bank and the European Commission also agreed to ease accounting rules, toughen financial regulations, and weaken enforcement of European Union competition and budget laws.
“Each government will act according to its own methods and its own means but in a coordinated manner with the other European states,” French President Nicolas Sarkozy, who called the meeting in Paris today, told reporters.
The failure to forge a consensus approach to shoring up European banks roiled by record borrowing costs reflects the divisions in the 27-nation bloc. Germany criticized a plan floated by French Finance Minister Christine Lagarde this week to set up a rescue fund. A chorus of opposition greeted Ireland’s decision to guarantee its banks’ deposits and debts.
“Each country must take its responsibilities at a national level,” German Chancellor Angela Merkel said at a joint press conference after the summit.
Governments, their economies sinking toward recession, have rescued five European banks this week and Belgian authorities today scrambled for ways to save Fortis.
To contact the reporters on this story: Sandrine Rastello in Paris at srastello@bloomberg.net;
“I want the message to go out from this meeting today: No sound and solvent banks should be allowed to fall because of a lack of liquidity,” Brown told reporters ahead of the closed door meeting.
“We must take the action that is necessary to sort out the failings that exist in the system,” he added.
Before the talks there was sharp disagreement between Germany and France on how to proceed, with Berlin shooting down a French bid to promote a joint European bailout fund similar to the US package.
But when Sarkozy welcomed the German chancellor to the summit, the pair were careful to appear in agreement on the broader issues.
“We believe that in this difficult period European countries should shoulder their responsibilities, but that those who did the damage should also play their role,” Merkel said.
“We are going to dicuss putting in place mechanisms of prevention. There is a high level of agreement and understanding among us about what to do to make sure this doesn’t happen again,” she added.
Sarkozy agreed: “You can translate everything Madame Merkel just said. I’m completely in agreement. A global problem needs a global solution.
“In today’s world, Europe needs to demonstrate its will to find an answer. That will reassure the world, taxpayers, markets and savers.”
But the European leaders were unlikely to agree a US style fund to underwrite institutions exposed to bad credit.
France privately floated the idea this week, European officials said, and the Dutch government talked in terms of more than 300 billion euros (416 billion dollars) being set aside by European governments.
Germany and Britain shot this down quickly, however, and the Paris talks were expected to concentrate on improving coordination between governments on financial bailouts and on reform to accountancy rules.
Before leaving London, Brown said he would call for the early release of a previously announced 15-billion-euro (21-billion-dollar) European fund to help provide small business loans.
France still sees the summit as an opportunity to push for more state regulation in place of the free market approach of recent years that many blame for allowing the crisis to develop.
Ahead of the summit, Sarkozy met with the French head of the International Monetary Fund, Dominique Strauss-Kahn.
“President Sarkozy wants the Europeans to be coordinated. He wants a collective response. He wants to avoid a lack of solidarity between Europeans. This is the right response,” Strauss-Kahn told journalists after his meeting.
“In the eurozone we haven’t yet undergone trial by fire. This is a trial by fire. Europe, and in particular the eurozone, needs to show it is capable of responding in a crisis,” he said.
Last week, when the financial storm hit European banks, Sarkozy urged the Group of Eight industrialised powers “to establish the basis of a new international financial system.”
The four leaders were to hold two hours of talks at the Elysee Palace followed by a working dinner. A press conference was planned for later in the evening.
Britain, France, Germany and Italy are Europe’s representatives on the G8.
They were joined at the summit by European Commission president Jose Manuel Barroso, Jean-Claude Juncker, who chairs the eurozone single-currency group and Jean-Claude Trichet, president of the European Central Bank (ECB).
