As the United States finally adopted the 700-U.S. billion-dollar bailout plan Friday in efforts to cope with the escalating financial crisis, a divided European Union (EU) is unlikely to follow suit.
The past week has seen several European banks badly hurt by the financial turmoil, prompting EU governments to infuse billions of euros to keep them afloat.
Till now, all those rescue efforts have been on national level or by several EU member states on an ad hoc basis. There was virtually no EU-wide coordination in place.
When the financial crisis is taking its toll on Europe, 10 leading European economists published an open letter Wednesday, calling on EU governments to launch coordinated, Europe-wide recapitalization of the financial sector, either by buying shares in the banks or by converting debt into shares.
The economists warned that the current "piecemeal approach" of rescuing individual banks with national money is leading to "the Balkanization of the European banking sector."
Admitting that "the national responses and ad-hoc co-operative efforts to date have been useful," the economists, however, said, "interdependence among European banks is too deep and too wide-spread for national responses or case-by-case coordination to be enough."
"A systemic crisis demands a systemic response ... It is critical that national authorities sit together and coordinate their responses, developing Europe-wide solutions where appropriate," they said.
However, the proposal for a U.S.-style rescue has so far received a chilly response from EU policy makers and key member states.
EU Commissioner for Economic and Monetary Policy Joaquin Almunia said the financial crisis is not so serious in Europe that a U.S.- style plan is needed.
"The situation we face here in Europe is less acute and member states do not at this point consider that a U.S.-style plan is needed," he told the European Parliament last week.
Even if there was a need, Almunia added, it should be decided by each member state.
European Central Bank chief Jean-Claude Trichet said the EU's political structure was ill-suited to a common bail-out scheme, suggesting each EU member state, instead of Brussels, is in the position to do that.
"We do not have a federal budget, so the idea that we could do the same as what is done on the other side of the Atlantic doesn't fit with the political structure of Europe," he told a news conference Thursday.
His stand was backed by Eurogroup Chairman Jean-Claude Juncker, who said: "I don't see the need for us to set up a similar program in Europe."
Two major powers in the 27-nation EU bloc, Germany and Britain, have also rejected the U.S.-style plan.
British Prime Minister Gordon Brown has suggested that his county would not offer its banks a bailout fund modeled after the one U.S. President George W. Bush has pushed for Wall Street.
Brown's German counterpart Angela Merkel has earlier said Germany "cannot and will not issue a blank check for all banks."
The German Finance Ministry also said the German government "completely disagreed" with the idea.
Earlier media reports quoted sources from several European governments as saying that France, which currently holds the rotating EU presidency, backed the idea of creating a special fund of some 300 billion euros (413 billion dollars) to rescue any crisis-hit European bank.
But French President Nicolas Sarkozy denied the reports Thursday, saying no such fund was under consideration and no EU-wide bailout was in the works.
Sarkozy will host a summit in Paris Saturday aimed at coordinating European positions on the global financial crisis, the French presidential office announced on Thursday.
Leaders from France, Germany, Britain and Italy, as well as European Commission President Jose Manuel Barroso, Trichet and Juncker are expected to attend the summit.
Many analysts, however, see little possibility of the upcoming mini EU summit emerging with plans for a EU-wide bailout fund.
(Xinhua News Agency October 4, 2008)
