ROBERT SIEGEL, host:
And the financial crisis has gone global. From Brazil to Russia, markets are plummeting. Today, European stocks suffered their steepest daily decline ever, down more than seven percent. Banks across the continent are now under threat, and there's an added complication to the crisis in Europe. It is the idea of European economic unity. From Luxembourg, NPR's Tom Gjelten reports.
TOM GJELTEN: The 15 countries using the euro as their currency across the so-called Euro Zone now constitute the largest economy in the world. And in theory, Europeans say it should be managed as a whole. So the leaders of Germany, France, Britain, and Italy dutifully gathered outside Paris on Saturday to discuss the spreading banking crisis, but no unified European strategy was agreed.
And one day later, German Chancellor Angela Merkel showed that her government intends to focus first on the problems in Germany. The German government, she said, from now on, will guarantee the safety of all private accounts in German banks. Finance Minister Peer Steinbrueck discussed the move this morning on German radio.
Mr. PEER STEINBRUECK (Finance Minister, Germany): (German spoken)
GJELTEN: This was a signal to savers, Steinbrueck said, that they don't need to fear for their money. That's important in this situation, he said, because we don't want people to run to their banks and take out their money because they're afraid.
That made sense, but what was missing from the German announcement was any thought that such a step should be taken jointly by European governments rather than separately by each country. Bernhard Speyer is head of financial markets and regulation at Deutsche Bank in Frankfurt.
Dr. BERNHARD SPEYER (Director, Banking, Financial Markets, Regulation, Deutsche Bank Research): Clearly, this is no way of dealing and managing a single market. And I for one, certainly, find it rather strange that the German government announced this measure after they met with other European leaders on Saturday in Paris. And apparently, there was no coordination whatsoever on this policy move.
GJELTEN: In fact, Germany was not alone. The government of Ireland last week guaranteed bank accounts in that country. Denmark followed today, and the government of Austria is considering a similar measure. Daniel Gros directs the Center for European Policy Studies in Brussels.
Mr. DANIEL GROS (Director, Center for European Policy Studies): The general approach is everybody for himself and at every national level, finance ministers seek to just save their own clients, their own banks, and leave the other problems to the rest of the EU.
GJELTEN: For 20 years, the countries now using the euro currency have been integrating their monetary systems, but they still haven't created joint regulatory authorities. Again, Bernhard Speyer of Deutsche Bank.
Dr. SPEYER: The danger with very diverse national approaches is that it ultimately threatens to deepen the crisis and to unravel the single market.
GJELTEN: The financial crisis in Europe could actually worsen under a country-by-country approach, Speyer and others argue, because governments could turn against each other, raising the costs of intervention. Just a week ago, European leaders were reassuring their people that their economies were less likely than the United States to be affected by a credit crisis because their financial institutions were more highly regulated. Daniel Gros says that sense has now evaporated.
Mr. GROS: There are extremely serious problems with the financial sector on both sides of the Atlantic. At one point in time, one might seem more important than the other, but it's quite clear that the economy will be affected both in the U.S. and in Europe. The only question is, to what extent can one limit the damage.
GJELTEN: Finance ministers from the European Union countries began gathering here in Luxembourg today for a two-day meeting. Their goal, to make another effort to attack the financial crisis together. Tom Gjelten, NPR News, Luxembourg. Transcript provided by NPR, Copyright NPR.
