European leaders prepared for market opening

Egypt News.Net
Sunday 12th October, 2008

European leaders, meeting in Paris on the weekend, have agreed to a plan to tackle the banking crisis, saying no big institution will be allowed to fail.

The leaders have pledged to guarantee loans between banks until the end of 2009, and have said they would put money into the purchase of bank preference shares.

French President Nicolas Sarkozy said all the leaders had been taking unprecedented steps to throw banks a lifeline before the major markets re-opened on Monday.

News of the rescue plan was first revealed by Mr Sarkozy, whose country currently holds the rotating presidency of the EU.

Mr Sarkozy said leaders had agreed a framework in which individual countries would be able to inject capital into their own banks by means of preference shares.

He said governments in Germany, France and Italy among others would be presenting their individual plans on Monday, within the agreed framework.

Mr Sarkozy said bank guarantees would be made at commercial rates, and he stressed careless financiers would not be able to benefit from the public intervention.

In fact, he said: 'Where managers are at fault they will be dismissed.'

While Mr Sarkozy said the plan put together by the leaders would address all aspects of the financial crisis, he could not say how much it would eventually cost.

After the talks European Commission president Jose Manuel Barroso said the plan would end the excessive pessimism of the markets.

The plan was also welcomed by the head of the International Monetary Fund, Dominique Strauss-Kahn.

Speaking in Washington, he described the plan as comprehensive and one which the market could reflect.

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