No Joint European Strategy On Banks
Sunday, October 5, 2008
PARIS, Oct. 4 -- The leaders of Europe's four largest economic powers vowed Saturday to protect their banks from the continuing reverberations of the increasingly global financial crisis but could not agree on a common Europe-wide strategy.
Unlike the United States, which last week committed $700 billion in government money to shoring up Wall Street, Europe plans to continue dealing with its financial problems on a case-by-case basis. That approach, which has involved tens of billions of dollars at a step, is complicated by the transnational presence of so many large European financial institutions.
But the European leaders did call for a global economic summit by year's end aimed at revamping the international financial system, which is a legacy of a conference held at Bretton Woods, N.H., in the waning months of World War II.
French President Nicolas Sarkozy, Europe's most vocal advocate of a continent-wide response, announced that for now, he and the leaders of Britain, Germany and Italy agreed in four hours of discussions only that each country would use "its own means" to safeguard banks from collapse but would do so "in a coordinated way."
The outcome seemed to fall well short of the common policy that French and other officials had spoken of in recent days amid a rapid series of financial failures and a freezing up of the capital markets in Europe, which rival or by some measures exceed the size of the U.S. markets. The disunity in Europe also was apparent in complaints by some other countries that they were not even included in the discussion.
Failure to pursue a broader bailout reflected particularly strong opposition from Chancellor Angela Merkel of Germany and Prime Minister Gordon Brown of Britain to any attempt at pooling resources for a Europe-wide fund to protect weak banks. Each government should handle its own banking problems, they said, because each country -- and even each bank -- has specific problems that must be dealt with in different ways.
Indeed, even as the leaders discussed restoring confidence in the banking system, news reports said Germany's $49 billion rescue last week of the Hypo Real Estate Bank may not have been enough and that a further injection of government cash is under discussion. Similarly, the governments of Belgium and Luxembourg were said to be in negotiations to buy up remains of the giant Fortis financial group in their countries, following up on the Netherlands' nationalization last week of Fortis operations there. The Fortis rescue demonstrated the transnational nature of Europe's financial problems.
The lack of common strategy among leaders of Europe's main economies at a time of crisis with direct effects on the well-being of their citizens suggested that the 27-nation European Union, while united in many ways, still has a long way to go before becoming the continent-wide economic and political authority it has set out to be. In addition, some of the grouping's smaller members chafed at being left out of Saturday's summit, with Finnish Finance Minister Jyrki Katainen calling the restricted invitation list "a very bad idea."
Seeking to reassure nervous Europeans, however, the four leaders described their summit as a demonstration of resolve to prevent further bank crashes, make sure depositors do not lose their savings and get money flowing through the choked financial system again for businesses and consumers.
"Today was expressed with great clarity the will of our countries to guarantee citizens' savings and preserve citizens' confidence in the banking system, which must continue to support the real economy," Prime Minister Silvio Berlusconi of Italy told reporters.
Merkel, whose government irritated French officials with public opposition to the European bailout fund proposal, called the summit conference "an important contribution" to restoring confidence in the continent's financial system. She and others pointed to the expression of determination not to let banking failures spread, indicating European governments are ready to intervene individually if not collectively.
"We jointly commit to ensure the soundness and stability of our banking and financial system and will take all the necessary measures to achieve this objective," a communique said.