Euro countries try to ease credit crunch
Published Monday October 13th, 2008
Economy Raft of emergency measures will be enacted 'without delay' in 15 countries
PARIS - European countries agreed Sunday to temporarily guarantee bank refinancing as part of a raft of emergency measures to ease the credit crunch.
The head of the region's central bank welcomed the unity - but warned there is more work to do.
"The force of unity that we showed today is a fundamental element of confidence," said European Central Bank chief Jean-Claude Trichet.
But, he warned, "There are still many things to do," both by governments and central bankers.
French President Nicolas Sarkozy said the measures - which also include help with liquidity and injections of capital to new accounting rules for banks - will be enacted "without delay" in the 15 countries using the euro - with simultaneous cabinet meetings being held today in Italy, Germany, France and others.
However, there was no sum given on how much these measures would cost, and Sarkozy said each country would decide how much it would spend.
The rest of the 27-member European Union will have a chance to sign up to the measures when they meet Wednesday.
Sarkozy said he hopes to persuade the United States to agree to a broad summit involving all the world's major economies to agree on international measures.
Sarkozy chaired the emergency summit of leaders of the 15 euro zone countries to find European solutions to the global financial crisis.
Their final declaration said the governments would guarantee "for an interim period and on appropriate commercial terms" new debt issued by banks for up to five years.
"This scheme would be limited in amount, temporary and will be applied under close scrutiny of financial authorities until Dec. 31, 2009," it said.
The statement said that one way that governments could save banks would include buying big stakes.
Sarkozy said the measure taken by the leaders is "not a gift to banks."
He said it will be in place through the end of next year.
"Banks need to be loaned money," he said.
"So that this confidence is restored, states will have the possibility to guarantee the loans that banks take out, guarantee them under different forms."
German Chancellor Angela Merkel said financial instruments agreed upon by euro zone countries will make the crisis "a bit more manageable."
"It will allow markets to start functioning again, that was our aim. It is a strong message to the markets."
As the financial crisis drags down the global economy, world leaders are scrabbling for way to stop the panic. But efforts to agree a co-ordinated global response have stumbled as leaders seek to address the unique challenges of their own countries.
"It's not easy," said Sarkozy.
"We have different traditions. For some of us we don't have the same currency.
"We have different regulators."
But, he said, "In a situation of urgency we had to take responsibility."
Even within the EU, some countries are facing the collapse of a housing market, some have had to step in to save banks, while others have faced different problems.
Finance ministers from the Group of 20, which includes rich countries and major developing nations such as China, Brazil and India, meeting in Washington this weekend, pledged to intensify their efforts to unblock a frozen financial system before it does more damage to an increasingly shaky global economy - but made no concrete offers of new moves.
Following annual meetings by the World Bank and the International Monetary Fund in Washington this weekend, the European leaders' decision will be watched closely by markets today.
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