Global Economics

Britain Now Backing EU-Wide Rescue Plan


In an about-face, British Prime Minister Gordon Brown said a

Europe-wide funding plan is needed to tackle the widening financial crisis

In a sharp about face, UK Prime Minister Gordon has written to EU leaders encouraging the creation of a "Europe-wide funding plan" to tackle the worsening financial crisis.

As recently as last week, Mr Brown said his country was opposed to any EU-wide rescue package.

Writing to French President Nicholas Sarkozy on Wednesday (8 October), the British leader gave details on the UK's own £500 billion (€630 billion) plan announced yesterday morning and added that a "concerted international approach" was needed. The letter was also copied to other EU government leaders.

Speaking to reporters after announcing the UK plan, Mr Brown said he had also spoken to the French leader.

"We have invited other European countries to consider proposals we have put to them this morning on medium term funding and are in active consultation about how we can adopt a European-wide funding plan," he said.

The UK plan that part-nationalises the country's banking sector will deploy £50 billion to buy preference shares in banks, £200 billion in short-term loans and an additional £250 billion to guarantee loans between banks.

Meanwhile, Mr Sarkozy, whose country currently chairs the bloc's six-month rotating presidency, has suggested fresh EU actions will soon be taken.

"France and the European presidency are working on this global, co-ordinated response and in the hours ahead we will have concrete results," he said during a conference in the southeast of the country.

The French president gave no details on the response and also seemed to suggest that the Brown plan was not a model for EU-wide planning, saying the UK bail-out was "perfectly adapted to the situation his country is in."

Separately, the French prime minister, Francois Fillon, told his country's parliament that France had set up its own fund to support banks, but that institutions would continue to be aided on an ad-hoc basis.

'No Italian bank will fall'

Meanwhile, Italy yesterday also passed a decree supporting the country's banks through a part-nationalisation, although no explicit amount of funds has been mentioned. Cash will be offered to banks in exchange for non-voting shares in the institutions.

"No Italian bank will fail. No Italian saver is at risk," Prime Minister Silvio Berlusconi said.

Economy minister Giulio Tremonti however underscored that the move did not amount to a rescue fund, and, as in France, banks would be offered the money on a case-by-case basis.

The Italian government also guaranteed deposits up to €103,000.

Slovenia yesterday also announced extended bank guarantees. In the Balkan country's case, all private and small business savings are now protected.

"The Slovenian government wants to provide the same guarantees as other EU countries, therefore we will introduce unlimited state guarantee for bank deposits (of private individuals and small companies)," finance minister Andrej Bajuk told reporters.

Stock market turmoil

Further to the east, Romania, Russia and Ukraine all temporarily suspended trading in their stock exchanges on Wednesday to prevent further slides in shares.

Russia's bourses, the RTS and Micex were closed for two days after the former dropped 11 percent and the latter 14.4 percent ahead of the trading suspension.

The Bucharest Stock Exchange in Romania halted trading after shares dropped a full 15 percent after just an hour, while in Ukraine, trading was suspended before the market opened.

Provided by EUobserver—For the latest EU related news

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