Brussels, 02/10/2008 (Agence Europe) - Great relief at a political level, as well as on the markets, prevailed following the US Senate vote for the Paulson plan of providing $700 billion to support the banking sector caught in the current storm. Determined to act in a different way, Europeans are examining many other options but the question of how these could be structured remains uncertain.
The US Treasury plan, which was approved on Wednesday 1 October (entitled: “Law on emergency economic stabilisation 2008”), still needs to be endorsed on Friday 3 October by the House of Representatives, which rejected it on Monday. In Brussels, the president of the Commission, José Manuel Barroso welcomed the Senators' vote. Speaking on Deutschland Radio¸ the president of the Eurogroup, Jean-Claude Juncker said that he was “very relieved that the hurdle of the Senate has been overcome”. He again explained that Europe would not respond with a similar rescue package and repeated that they could no longer accept “case by case” measures to respond to banking failures but had to, instead, implement “a more systematic defence strategy”.
The different perspectives for formulating a structured European response will be debated on Saturday 4 October in Paris by the four European members of the G8 (Germany, France, Italy and the United Kingdom) and Messrs Juncker, Barroso and Trichet. The Commission president has already mentioned some of the aspects he believes should be put forward in Europe as part of possible future coordination at an international level (EUROPE 9752). As well as the proposals presented yesterday by Charlie McCreevy on own funds and proposals expected on the financial ratings agencies (likely to be 12 November), Europeans may turn their guns onto hedge funds and examine the increased supervisory role of the European Central Bank. They may also look at a possible revision of accounting standards and how to improve coherency of the different national backing deposit guarantee systems. On this last point, there has been a chorus of announcements made to reassure savers (in France, Italy, Belgium and Ireland). The latter affirmed its intention to guarantee for two years all bank deposits and debts and possibly extend this guarantee to institutions from other countries that have a significant presence in Ireland. However, several states are concerned that such isolated and uncoordinated initiatives risk producing disparities between member states. On Thursday 2 October, President Sarkozy ruled out that France was planning to set up a European fund of €300bn to tackle banking institution failures. This idea is not supported by Germany but was put forward by the French minister of finance, Christine Lagarde, in an interview that Handelsblatt published the same day. A less comprehensive option of a common model with common rules for setting up different funds in member states may, however, be discussed on Saturday.
Meeting on Tuesday 7 October in Luxembourg, the Ecofin Council will also be adopting conclusions on executive pay. The conclusions aim to strengthen and update elements contained in the Commission's October 2004 recommendation. Finance ministers will insist that shareholder control of pay is strengthened and that performance and conflicts of interest are better taken into account. (A.B./transl.rh)