Monday, 6 October 2008

Newspapers : EU in Financial Turmoil 6th October

Gordon Brown is urged to guarantee deposits. Richard Tyler, The Telegraph (en)
Europe's turmoil batters London shares. PA, The Independent (en)

Germany guarantees savings to avert panic. Bertrand Benoit and James Wilson, The FT (en)
" ... “We aren’t sure exactly what they’re proposing,” said one UK official, noting that there was annoyance that Ms Merkel had acted unilaterally only hours after attending an economic summit in Paris at which she agreed there should be greater cross-border co-ordination of measures during the economic crisis ..."

Financial Crises Spread in Europe. Carter Dougherty, Nelson Schwartz and Floyd
" ...The crisis has underlined the difficulty of taking concerted action in Europe because its economies are far more integrated than its governing structures. “We are not a political federation,” Jean-Claude Trichet, the president of the European Central Bank, said “We do not have a federal budget.” ....
... “The European banking landscape was transformed fairly recently,” Mr. Pisani-Ferry said. “When the euro was first introduced, the question of cross-border regulation didn’t really arise.”
Optimists say one potential long-term benefit from the current turmoil is that it often takes a crisis to propel European integration forward. “Progress in Europe is usually the result of a crisis,” Mr. Eijffinger said. “This could be one of those rare moments in E.U. history” ."

Germany announces savings guarantee. Robert Winnett and Nick Allen, The Telegraph (en)
" ... "Ireland's action last week to guarantee all deposits made a common European approach to deposit guarantees necessary. Germany's decision makes it completely unavoidable" Mr Clegg said ...
... The danger of this crisis is that it may spark a new wave of economic nationalism, with each country looking for its own 'get out of jail free' card. People have to realise that selective or national approaches could lead markets to look to parts of the financial system in a distorted way," Mr Mandelson warned ..."

" ... They could not even agree in Paris on a bail-out package similar to the one that had just been approved in Washington ... in Paris, behind closed doors, the negotiations failed (and make no mistake, they did fail) to produce anything of significance without any help from public outrage ...... France, Germany, Italy and the UK could not agree on a single course of action because - as Mr Sarkozy effectively admitted in a characteristically irritable press conference performance - they all have different economic circumstances and needs. He described this as having "different cultures", but it adds up to the same thing: France and Germany do not have property-owning traditions that produce house-price booms and busts, the UK population has much greater credit liabilities than the French, etc, etc ...
... I cannot remember a time when the absurdity of the concept of economic union has been made so demonstrably clear, or when the democratic deficit of the EU - the way it does business with utter disregard for the opinions of its populations - has been so palpable if only by vivid contrast with the awkward, vulgar thrashing out of public policy that characterises the robust mass democracy across the pond ..."

" ...Public spending curbs and rules against state subsidies will be thrown – temporarily – out of the window to rescue European banks from the abyss of the global financial crisis, EU leaders agreed at the weekend ..."

Worst-case scenario is looming . David Wighton, The Times (en)
" ... Although the Government (UK) has made clear there is an implicit guarantee on all personal savings, it is very reluctant to make that explicit because of the potential exposure of the taxpayer and the concern that it would be difficult to remove once the crisis is over ..."

Iceland reels as bank rescues evaporate . Catherine Boyle, Hildur Helga Sigurdardottir and Peter Stiff, The Times (en)
" ... Iceland’s banks have been under pressure for most of the year, struggling with rampant inflation, the collapsing value of the currency and the general fallout from an overheated economy. In an attempt to curb inflation, the country’s central bank raised interest rates to 15.5 per cent, making it even more difficult for the banks to fund themselves ...

" ...The German Chancellor’s initiative may have torpedoed Mr Sarkozy’s aim of ensuring coordinated action on crisis-hit banks in the European Union ... Critics said that the snub would complicate the already difficult task of producing a single EU policy on the crisis. The obstacles were underlined in the final document from the Paris meeting, which contained vague commitments from Europe’s biggest economies to work together ...
... French officials said that he had achieved his aim of persuading Europe’s other three biggest economies to back his call for a G8 summit to lay the foundations for “new international financial system”. They also claimed he had scored a decisive victory as European institutions agreed to ease the budget deficit limits imposed on members of the Eurozone.
With France perilously close to the ceiling, Mr Sarkozy is seeking space to pump money into a recession-hit economy without falling foul of Brussels."

BNP pays €14.5bn to take control of Fortis, Michael Steen, Joshua Chaffin and Peter Thal Larsen,The FT (en)
" ... The all-share deal, announced on Sunday night by the Belgian government, is set to make BNP the biggest bank in the eurozone by deposits and will over time make Belgium and Luxembourg shareholders in the French bank ..."

Shockwaves took Europe by surprise. Peter Thal Larsen, The FT (en)
" ... When the US authorities allowed Lehman Brothers to fail last month, nobody expected that the decision would trigger a wave of nationalisations, rescues and government interventions across Europe ...
...“Ever since the Lehman collapse you’re seeing this real crisis of confidence,” Brian Lenihan, Ireland’s finance minister, said this week. “Once default begins to emerge on a large scale you risk a systemic failure.” ..."

The case for a European rescue plan. Wolfgang Münchau, The FT (en)
"... I agree that the few ad hoc rescues have worked. But do not fool yourself. They worked because they were the first wave of rescues and because they involved banks such as Fortis – of just the right size, based in just the right small- to medium-sized country where political leaders are sufficiently rational not to hold each other to ransom as midnight approaches on Sunday ... I shudder to think what would happen when Silvio Berlusconi, Angela Merkel, Lech Kaczynski and the next Austrian leader have to meet to discuss the future of a large cross-border European bank ...
...For Europe, this is more than just a banking crisis. Unlike in the US, it could develop into a monetary regime crisis. A systemic banking crisis is one of those few conceivable shocks with the potential to destroy Europe’s monetary union ... "

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