Thread: EU Bailout Fund Rejected to Rescue Banks

EU Bailout Fund Rejected to Rescue Banks

Thursday, October 2, 2008 9:02 AM

BERLIN/DUBLIN -- The chairman of euro zone finance ministers sided with Germany on Thursday in rejecting any need for a European rescue fund for distressed banks, but the Dutch government endorsed a similar idea.

France confirmed that President Nicolas Sarkozy would host a summit on the global financial crisis with leaders of Germany, Britain and Italy, European Commission President Jose Manuel Barroso, European Central Bank President Jean-Claude Trichet and Eurogroup chairman Jean-Claude Juncker in Paris on Saturday.

The official announcement put an end to uncertainty about a meeting Paris has pushed for, due to disagreements among the main European Union governments on the right response to the deepening credit crunch.

Ireland's parliament defied opposition from London and misgivings in Brussels by passing legislation to guarantee all deposits in Irish-only banks that has already triggered an inflow of cash from British banks.

Eurogroup chairman Jean-Claude Juncker said he was "very relieved" the U.S. Senate had adopted a $700 billion plan to take so-called toxic assets off banks' balance sheets, but insisted Europe did not need a similar program.

Several European government sources said France had floated the idea of a 300 billion euro ($418.4 billion) EU bank rescue fund ahead of Saturday's meeting, although Paris denied the existence of such a proposal.

"I don't see the need for us to set up a similar program in Europe," Juncker, who is also Luxembourg's prime minister, told Deutschland Radio Kultur.

The financial crisis went much deeper in the United States than in Europe, he said, but he hoped for a European response to the crisis that was a "bit more systematic."

Sarkozy publicly said no EU-wide bailout was in the works and denied a 300 billion euro fund was under consideration.

"I deny both the amount and the principle (of such a plan)," he told reporters at the French presidential palace.

British Prime Minister Gordon Brown's spokesman said he did not expect discussion of an EU-wide bank fund at the meeting.

"The purpose of the meeting will be to discuss how each of the four major economies in Europe are responding to the global financial crisis," he said.

SAFETY NET?

French Finance Minister Christine Lagarde has said a "European safety net" could be needed to prevent a bank in a smaller EU country from going bankrupt.

But German Chancellor Angela Merkel said Germany "cannot and will not issue a blank check for all banks."

Germany's Finance Ministry said the German government "completely disagreed" with the idea.

The Netherlands backed the reported French idea, saying EU countries should set aside 3 percent of their gross domestic product in national bank rescue funds that could be used in a coordinated fashion.

"Earlier this week a French plan was leaked that seemed similar to what we have been discussing in Europe," Dutch Finance Minister Wouter Bos told parliament.

Separately, Spain's Economy Ministry said it would support a coordinated EU effort to raise bank deposit guarantees from the current Europe-wide minimum of 20,000 euros.

The Irish decision on deposit guarantees posed a challenge for the rest of Europe in an era where banks are increasingly cross-border, risking a distortion of competition which EU rules are meant to prevent.

The European Commission said it had still not received a notification from the Irish authorities of the details of the law passed early on Thursday.

A European Commission source said EU regulators would probe Ireland's move but acknowledged that any legal action would be politically risky at a time when Brussels is trying to persuade the Irish to reverse their vote against the EU reform treaty, and would anyway take at least two years to come to court.

An Irish government source said Prime Minister Brian Cowen and Finance Minister Brian Lenihan were aware of the timing.

"They knew that there would be problems. But by the time a decision is made by the Commission, the money has already flowed into the Irish banking system, increasing liquidity," he said.

Italian Economy Minister Giulio Tremonti said global accounting rules should be discussed at the Paris meeting. A requirement that companies regularly restate the value of assets on their balance sheet to reflect changed market prices has been widely blamed for exacerbating the crisis.

Other possible European responses in the pipeline or on the table include mandatory regulation of credit ratings agencies after they were accused of having conflicts of interest and failing to spot risks in sub-prime mortgage-based securities.

http://moneynews.newsmax.com/financenew ... 36598.html

Only in America would we do such a thing... What a nice, clean efficient way to collapse a currency

And the government are double talking crooks. When are Americans going to have enough is enough.