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Europe divided over response ahead of Sarkozy finance summit
2008-10-02
PARIS (AFP) - The leaders of Europe's four biggest economies -- Britain, France, Germany and Italy -- will meet Saturday, Paris announced, amid sharp divisions over how to respond to the global financial crisis. President Nicolas Sarkozy's office said the summit would help European members of the Group of Seven developed nations coordinate positions before next week's meeting of their finance ministers in Washington. But the build-up to the Paris talks has already revealed a split between European powers on how to protect the banking sector, with Germany dismissing calls for a joint European fund to bail out failing banks. Sarkozy told reporters that France had not suggested creating such a 300-billion-euro (417-billion-dollar) fund and the finance ministry insisted publicly that neither the figure nor the idea had come from them. "There was an exchange of ideas but no French proposals. There was no French plan," said an official in Finance Minister Christine Lagarde's office. Nevertheless, a European official in Paris confirmed that France had not ruled out a large-scale bail-out, despite opposition from Britain and Germany. "London and Berlin are oposed to a Paulson-type plan and prefer a case-by-case approach," he said, referring to the 700-billion-dollar rescue fund for American banks proposed by US Treasury Secretary Henry Paulson. "France thinks you should not exclude the idea, which could be useful," he added, speaking on condition of anonymity. On a visit to Paris, Dutch Prime Minister Jan Peter Balkenende also denied reports that his government was proposing a single Europe-wide bailout fund, saying that there had been a "misunderstanding" on the issue. Instead, he said, countries should agree on a common strategy to set aside three percent of their gross national product to aid faltering capital markets. "I am against a EU fund. But I am also against a situation that we're only talking about national measures and national instruments because we do have (a) unified European financial market," Balkenende said after meeting Sarkozy. "The important thing now is that we have a more comprehensive and more unified approach," he said. British Prime Minister Gordon Brown's office confirmed he would attend Saturday's summit but stressed that many of the issues emerging from the financial crisis were best dealt with at the national level. "It is right that individual countries would want to take their own decisions, particularly when national taxpayers' money is potentially at risk," Brown's spokesman said in London. Many media commentators have blamed France for the confusion, suggesting Sarkozy was so keen to take credit for leading Europe's response to the crisis that he forged ahead with the summit plans without consulting his partners first. Sarkozy has invited Brown, Germany's Chancellor Angela Merkel and Italian Prime Minister Silvio Berlusconi to Paris. European Commission president Jose Manuel Barroso, European Central Bank chief Jean-Claude Trichet and the head of the eurogroup finance ministers' committee, Jean-Claude Juncker, will also attend. Paris has been keen to develop a European response to the crisis, which began when US banks found themselves dangerously exposed to bad debt and then spread round the world as credit markets choked up. France's European partners have so far preferred unilateral and bilateral measures to protect their institutions and are looking forward to the G7 meeting of finance ministers in Washington next week. On Wednesday, the German finance ministry dismissed talk of a joint bail-out fund. "Germany does not think much of such a plan," spokesman Torsten Albig told AFP. Irish lawmakers meanwhile passed a controversial emergency law guaranteeing bank deposits, despite protests from other capitals that the move gives its financial sector a competitive advantage over neighbouring countries. Britain in particular has argued that the guarantee covering Ireland's six main banks is unfair amid fears that savings in British banks could be taken out and put into Irish accounts.
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