Debate Over EU Cooperation As Credit Crisis Widens
French President Nicolas Sarkozy has called for a European financial summit in Paris on Saturday. Leaders from Britain, Germany and Italy, together with the president of the European Commission and the head of the European Central Bank are expected to take part.
The meeting comes amid disputes in Europe over the amount of coordination needed to respond to the global financial crisis.
In many ways, the financial crisis is a microcosm of the problems of the EU as a whole: How much can and should each sovereign country do on its own, and how much should efforts be coordinated through one of the European financial or political bodies?
Some politicians across Europe have called for a $500 billion, U.S.-style bailout plan, after the individual bailing out of Belgian, British and German financial institutions.
Ireland's Surprise Move
The country that has focused everyone's minds on the issue of coordination — or lack thereof — has been Ireland. The Irish government made a surprise unilateral move this week to guarantee all deposits, bonds and debts in the six biggest Irish banks for the next two years.
French Finance Minister Christine Lagarde says Dublin should have conferred with other nations before taking such a step.
"A measure decided in one member state has to be shared in advance with other member states, because when something happens in one member state, it affects everybody else around," Lagarde says. "So there needs to be that level of cross-sharing of information, anticipation of decisions. And sometimes, we need to make those decisions extremely quickly, so we need to have the process in place."
Lagarde's views have been echoed by other officials around Europe, especially in Britain, where some savers have already responded by moving their deposits into Irish banks. The Irish government has defended its unilateral move.
"We were facing a very serious crisis in Ireland," says Michael McGrath, vice chairman of the Irish parliament's Finance Select Committee. "It may well have been the case that we were looking at an imminent collapse — that may well be the case. The minister was advised very closely by the financial regulator in Ireland and the central bank that this measure was urgently required. So waiting around was a luxury I'm afraid we didn't have on this occasion, and that's why the government took this unprecedented — and indeed courageous — initiative."
'Appearing To Do Something Matters'
The move of funds has not just been cross-border. British people have also been moving their money in large amounts into the banks, such as Northern Rock, that have already been rescued by the British government and that provide a 100 percent guarantee.
As for the meeting called by Sarkozy on Saturday, there seems to be little agreement about how the talks should proceed.
Germany has made its opposition to any coordinated European bailout plan known, while the chairman of the euro zone finance ministers has also rejected any need for a European rescue fund for distressed banks.
French commentator Anne-Elisabeth Moutet says it will be very difficult to coordinate concrete action, but that may not be the main aim of the meeting.
"It's difficult to coordinate a response, but just being seen to be doing something matters," Moutet says. "So appearing to do something matters in itself."
Though the meeting may not come to any concrete conclusions, European leaders have noticeably shifted from just criticizing American profligacy to focusing much more on solving their own problems at home.
The finance ministers and the central bank governors of the G-8 countries will then fly to Washington next week in a further attempt to coordinate international responses.
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