Mini-summit to seek joint EU response to crisis

The leaders of France, Germany, Britain and Italy are due to meet in Paris on Saturday to forge a common EU response to the financial crisis after the uproar triggered by suggestions to create a US-style fund to save ailing European banks.

The summit will seek to iron out differences as EU countries scramble to save their financial sectors.

Greece announced yesterday that it would backup all savings deposited in its banks, with Finance Minister George Alogoskoufis promising that the monies would be “absolutely guaranteed” by the state in a bid to soothe growing fears among the population.

The Greek move is similar to an Irish plan which had raised concerns across Europe because it was seen as anti-competitive. Earlier this week, the Irish government offered state guarantees to the financial sector in an operation which was potentially evaluated at €440 billion, over twice the country’s GDP.

The plan, which was approved on Thursday (2 October) by the Irish Parliament, made the Irish stock exchange rebound as investors rushed for safety. But the move was criticised as unfair competition by the British Bankers’ Association (BBA) and by Neelie Kroes, the EU’s commissioner in charge of competition policy.

Saturday’s mini-summit will seek to prevent such disorder, with Commission President José Manuel Barroso yesterday reiterating calls for a “structured European response” to the crisis (EURACTIV 02/10/08).

But some are questioning what the summit can actually deliver. “Since the Irish are not invited, it is doubtful that this summit is going to produce anything of substance on this issue, though EU leaders will have an opportunity to show their indignation,” wrote Eurointelligence, a blog on financial and economic affairs.

Meanwhile, French President Sarkozy denied earlier suggestions from his Finance Minister Christine Lagarde to create a €300 billion fund to rescue ailing European banks. “France never worked on nor proposed a plan of this kind,” said Henir Guaino, one of Sarkozy’s closest advisers. “Such a fund would be very difficult to create quickly and very difficult to manage at a European level,” he told Canal Plus television.

In a related development, the European Central Bank on Thursday (2 October) moved closer to cutting its interest rates, with President Jean-Claude Trichet saying inflation risks had calmed down due to the “very unfortunate consequences” that the current turmoil was having on the economy. 

“The ECB yesterday came a lot closer to a rate cut than Jean-Claude Trichet’s statement suggests,” said Eurointelligence. “Rate cuts are going to happen earlier than markets currently expect, and they will be steeper,” the blog predicted in its daily press review.

Read more with Euractiv

EU unveils cautious plans to respond to banking crisis

The European Commission yesterday (1 October) again called for a "structured European response" to the current financial crisis but showed a cautious approach in the long-awaited proposals it put forward to revise banks’ capital requirements.