October 28th, 2008
EU Leaders are Lending Their Endorsement to a Continent-Wide Bailout Plan
EU leaders have recently endorsed a Euro 1.7 trillion dollar ($2.3 trillion) continent-wide emergency bailout plan for the banking industry during summit talks that occurred on Wednesday, then turned their debate to other measures that would prevent global financial crisis from completely stalling the entire continent’s economy. Numerous EU officials and diplomats including Polish Finance Minister Jacek Rostowski confirmed that this plan has been endorsed by leaders of the EU.
The agreement will most certainly pave the way for all 27 nations in the EU to shore up national banks along with other similar financial institutions. Under the broad principles of this bailout plan, individual countries would be coming together to put up a total of $2.3 trillion dollars or 1.7 trillion euros in guarantees and emergency aid in order to help the banks.
This deal is coming after Britain along with 15 other countries utilizing the Euro passed the plan on Sunday. This deal is designed to reassure financial markets and investors that are still feeling shaky that everything possible is currently being done to stop the financial meltdown from becoming any worse. This plan is going to give each of the individual nations a greater amount of flexibility so that they may choose from a wide range of different measures that may solve their individual problems. This may include buying shares in banks, or even guaranteeing loans from savings and interbank institutions.
The European moves are modeled on the Euro 60 billion or $88 billion dollar plan from Britain in order to partly nationalize major banking institutions. The British Prime Minister, named Gordon Brown, has also made a personal promise to guarantee billions of euros worth of interbank loans in order to restore confidence of consumers in the financial sector as a whole. This joint action, coupled with United States plans which are broadly similar and involve taking stakes in large banks, have really helped to turn around many of the severe declines that the world’s stock markets have been experiencing in recent months.
However, many credit markets remain to be in distress because banks are fearful and are only willing as a result to lend to each other at rates which are abnormally high, making credit even harder for businesses and consumers to obtain. EU Lenders have also been debating a call by Brown to hold global wide talks among the top economies in the world, including India, China and the United States among others so that the world’s financial systems may be reformed.
According to Brown, a global summit may be held as early as in November or December, aiming to once again launch stalled global talks of trade in the process. In a document that was passed to leaders, Brown said that banks should rethink how they are addressing risk. He also called for a strengthening of rules covering many issues like how many reserves banks need to hold to make sure that potential losses are covered and that transparency be improved in financial markets as well.
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