France and Germany clash over bank rescue plans

The two countries often referred to as “the engine of the European Union” clashed yesterday (1 October) over whether the EU should create a fund to rescue banks hit by the global financial crisis.

French President Nicolas Sarkozy’s proposal for a European fund was rebuked by Germany, while the UK also expressed scepticism. 

French Finance Minister Christine Lagarde raised the possibility of establishing a European fund “to support the financial sector”. She suggested that the rescue fund would be especially needed for banks in smaller EU countries. She did not specify figures, but officials said the fund could hold some 300 billion euros. 

However, Germany rejected the plan, with the finance minister’s spokesperson, Torsten Albig, saying his country did not support the idea. Berlin is said to prefer custom-made solutions for individual banks in difficulty instead of putting in place a global plan. 

Mini EU summit called by France 

Meanwhile, the French Presidency has called a mini-summit of European members of the G8 for Saturday (4 October) to discuss the Union’s response to the global financial crisis. But British Prime Minister Gordon Brown and German Chancellor Angela Merkel are said to be doubtful about the possible results of such a meeting. Luxembourg Prime Minister Jean-Claude Juncker, who is expected also to participate in the mini-summit as Eurogroup President, called for a “more coherent” European approach. He was supported by European Central Bank President Jean-Claude Trichet. 

The French bank rescue plan appears to be similar to the US ‘Paulson plan’ for a 700-billion dollar rescue package that US lawmakers are struggling to pass (EURACTIV 01/10/08). Juncker recently said the EU would not imitate the US in fighting the financial crisis (EURACTIV 18/09/08). 

In the meantime, Commission President José Manuel Barroso said the global crisis made it imperative to strengthen banking supervision at EU level. Barroso recently rejected comparisons between the banking crises in the US and Europe, saying they were in large part the result of imbalances in the US budget. He added that Europe had every reason to retain “solid and reasonable rules” to maintain stable budgets. 

Read more with Euractiv

EU attacks failed US bail-out, seeks joint response to crisis

The European Commission yesterday (30 September) strongly condemned the US House of Representatives' rejection of a $700 billion rescue plan, calling on Washington to assume responsibility for the global financial crisis that originated in the States. Meanwhile in Europe, calls for a coordinated EU approach to the turmoil are growing.