Europe’s four major powers have vowed to do all they could to prevent Wall Street’s turmoil from destabilizing their banking systems — even as a 35 billion euros (US$48 billion) plan to save a German lender fell apart.
But aside from vague statements of intent and calls for tighter regulation, the leaders of Germany, France, Britain and Italy shied away on Saturday from the sort of massive bailout passed by the US Congress a day earlier.
Europe’s four largest economies pledged to coordinate national responses to help banks in distress, but their failure to agree an EU-wide plan reflects divisions in Europe on how to deal with the crisis washing up on the continent’s shores from the US.
France had mooted a multi-billion-dollar EU-wide government bailout plan, but backed off after Germany said banks must find their own way out.
The EU’s failure during the past week to pull together on dealing with the crisis has caused worry. Both Ireland and Greece angered their EU neighbors by acting independently and guaranteeing to protect all savings.
The Saturday afternoon summit was arranged hastily with the aim of reassuring jittery markets and investors. On Friday, US legislators approved a US$700 billion government plan to buy up bad debt from banks and help unfreeze lending.
The four leaders — French President Nicolas Sarkozy, British Prime Minister Gordon Brown, German Chancellor Angela Merkel and Italian Prime Minister Silvio Berlusconi — vowed to ensure the soundness and stability of Europe’s banking and financial system, but they gave few specifics.
Instead, they took a swipe at European subsidy rules designed to ensure fair competition by preventing governments propping up failing companies.
Given the “exceptional circumstances,” they said, EU regulators should be flexible on laws that restrict how much governments can give companies in trouble.
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