RENEE MONTAGNE, Host:
The British government today said it's bailing out three of the country's largest banks. The announcement came after British Prime Minister Gordon Brown met in Paris with other European leaders, hosted by French President Nicolas Sarkozy. The EU States are working to coordinate efforts in order to try to stop this spiraling financial crisis. Eleanor Beardsley sends this report from Paris.
ELEANOR BEARDSLEY: For the second Sunday in a row, European leaders gathered in Paris posing for the cameras before hunkering down in crisis meetings over the economy. But this week, it seems the leaders were able to come together for more that just a group photograph. After three and a half hours of talks, Sarkozy announced that this time there would be a Europe wide rescue plan.
NICOLAS SARKOZY: (Through Translator) We have given ourselves the tools to react to markets that don't work anymore. In an effort to restore calm and take the right decisions at the right time, we will soon announce very important and big decisions in nearly every one of our member countries.
BEARDSLEY: Sarkozy said the first details of the plan would be unveiled today in simultaneous press conferences in Paris and Berlin. The leaders failure last weekend to come up with the united strategy to save banks and restore liquidity contributed to the worst sell off in European stocks in two decades. Sarkozy's Sunday night announcement was clearly meant to reverse that trend by reassuring markets ahead of Monday morning trading.
SARKOZY: (Through Translator) The governments of the Euro zones will give public guarantees for all European bank to bank operations through December, 2009. This is not a present to banks, but a way to allow them to continue functioning because our economy depends on them.
BEARDSLEY: The European plan is said to be modeled broadly on a rescue plan approved in Britain last week, that plan calls for taxpayer's money to be injected in banks and for governments to guarantee interbank lending. Interbank or bank to bank lending is the key to restoring liquidity to markets, says economist Joiovre Laurenzi(ph).
JOIOVRE LAURENZI: (Through Transalator): Quite simply the fact that the European plan will encourage banks to start lending each other money again is extremely important because it means the banks will also start lending to companies and into individuals again.
BEARDSLEY: For German Chancellor Angela Merkel, the Sunday night agreement was an about face from her go it alone stance a week ago, when she rejected French suggestions for a Europe-wide bailout plan. But since last week, Merkel has been criticized back home. A majority of Germans said her words did not instill confidence and two thirds said they didn't believe Germany would be able to protect its bank depositors. Douglas Herbert, a business editor for news channel France 24 says European leaders now realize they must act together.
DOUGLAS HERBERT: What we've seen is Europe speaking in a united voice sending a very strong message that the time for just words is over. They are determined. It's absolutely essential that they do act in a coordinated manner.
BEARDSLEY: The leaders also called for a November summit bringing together the top industrial nation along with the merging powers Brazil, China, and India to reform the global finance system. They said Europe would assert its values in the creation of a new financial order. This is Europe's hour and we are united, said Sarkozy. For NPR News, I'm Eleanor Beardsley in Paris. Transcript provided by NPR, Copyright NPR.
