France seeks EU unity on financial crisis (Reuters)
03.10.2008 18:10 Business
Divisions have emerged within Europe over the past week with Ireland, offering guarantees on all bank deposits prompting a flight of capital from British lenders to Irish banks, and Greece also promising to safeguard savers' cash.
Britain responded on Friday by increasing the compensation limit for bank saving to 50,000 pounds ($88,390) from 35,000 pounds in an effort to make British banks more attractive.
European officials lined up on Friday to urge a common approach to the market mayhem, while acknowledging that governments would have to act individually to tackle specific problems that arose in their own countries.
French President Nicholas Sarkozy is due to meet the leaders of Germany, Italy and Britain, as well as senior EU officials and European Central Bank PresidentJean-Claude Trichet on Saturday to try to find a common approach.
The meeting is billed as a precursor to an emergency summit of major world power leaders that Sarkozy is trying to convince his counterparts must be held before the end of the year.
"Who can doubt that we need this meeting when the world is on the edge of the abyss because of an irresponsible system," Fillon said in a speech to members of France's ruling conservative UMP party.
"Nicolas Sarkozy will reiterate that the only way out of this crisis will be a collective one. He will propose that Europe make its banking systems secure, unfreeze credit and coordinate its economic and monetary strategy," he added.
He gave no specifics, however, and officials across the continent were reticent on what would emerge from the meeting.
"We do not rule out any option to guarantee that no banking institution will be forced into bankruptcy," Fillon said. "The state will intervene each time it's necessary to secure our banking system."
IDEA SHOT DOWN
The financial crisis started in the United States but has since spread to Europe, with Germany, Britain, Belgium, the Netherlands and Luxembourg all rushing to save banks this week.
Several European government sources have said France floated the idea of a 300 billion euro ($418.4 billion) EU bank rescue fund ahead of Saturday's meeting, but Germany opposed the idea and Sarkozy later denied that any such project was on the table.
Sarkozy canceled diary engagements on Friday to prepare for Saturday's meeting and France's Europe Minister Jean-Pierre Jouyet said he had sent a letter to other EU leaders outlining French proposals to deal with the turmoil.
"We must, according to methods which can be different from one country to another, all agree to intervene where necessary and when necessary to avoid any systemic risk," Jouyet told Les Echos newspaper.
He said France also wanted better information sharing on bank balance sheets by the ECB, stronger EU regulation on bank credit capacity, securitization and leverage potential, looking at mark-to-market accounting rules and executive pay.
While European officials have ruled out an EU bailout plan, they said it is vital that U.S. lawmakers approve a $700 billion package drawn up by U.S. Treasury Secretary Henry Paulson, under which the Treasury will buy banks' bad assets.
The House of Representatives voted down the bill earlier this week, but it will now revisit the package, which has since been slightly revised and passed in the Senate.
"Secretary Paulson's plan obviously must be passed. It must be. It is necessary," Trichet said.
(Additional reporting by Clement Dossin in Antibes; Editing by Crispian Balmer and Andy Bruce)
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