Eurozone leaders hammer out joint action plan on financial crisis

www.chinaview.cn 2008-10-13 05:53:50  

    PARIS, Oct. 12 (Xinhua) --

Leaders from the eurozone countries hammered out an action plan in a joint response to the unfolding financial crisis at their first ever summit in Paris on Sunday.

    The financial crisis "needs concrete measures and unity. That is what we have today," French President Nicolas Sarkozy, who hosted the emergency summit with his counterparts from the other 14 eurozone members, said at a press conference.

    In a joint declaration after the summit, eurozone leaders pledged to "act together in a decisive and comprehensive way in order to restore confidence and proper functioning of the financial system, aiming at restoring appropriate and efficient financing conditions for the economy."

    Among those agreed measures, Sarkozy said governments, acting on national basis, would buy into banks to boost their finances and temporarily guarantee bank refinancing to ease the credit crunch.

    Eurozone leaders said each member state would supply additional capital to financial institutions by acquiring preferred shares or other instruments including non-dilutive ones so as to allow financial institutions to continue to ensure the proper financing of the eurozone economy.

    However, financial institutions have to accept additional restrictions, they warned.

    This measure mirrored a British bailout plan unveiled last week.

    The British government announced on Oct. 8 a massive plan which would inject 50 billion pounds (87 billion U.S. dollars) into its banks through the purchase of preferred shares.

    Ahead of the eurozone summit, Sarkozy received British Prime Minister Gordon Brown at his presidential residence at the Elysee Palace on a possible copy of the British model.

    Britain is a member of the European Union (EU) but stays out of the euro zone.

    In a bid to relieve funding problems of liquidity constrained solvent banks, eurozone leaders said the governments would guarantee "for an interim period and on appropriate commercial terms" new debt issued by banks for up to five years.

    "This scheme would be limited in amount and will be applied under close scrutiny of financial authorities until Dec. 31, 2009," it said.

    The guarantee will be provided on normal market conditions and all financial institutions in the eurozone countries will be eligible, but governments may impose further conditions for the beneficiaries of these arrangements.

    Sarkozy warned the measure taken by the leaders was "not a gift to banks."

    "Banks need to be loaned money," he said. "So that this confidence is restored, states will have the possibility to guarantee the loans that banks take out, guarantee them under different forms."

    Eurozone leaders are also committed to an efficient recapitalization of distressed banks so as to avoid the failure of relevant financial institutions.

    Luxembourg Prime Minister Jean-Claude Juncker, who chairs the euro group, described the action plan as a toolbox, in which each member state can choose its own instrument.

    But the declaration failed to give any indication of the possible scale of national rescue plans.

    In line with the action plan, France, Germany, Italy, Austria and other countries will unveil their bailout plans on Monday, with the German one expected to be worth around 400 billion euros (549 billion dollars).

    Analysts said the next 24 hours could be crucial for European markets to achieve a turning point after heavy losses last week.

    It is the first time that eurozone leaders hold a separate meeting without their counterparts from other EU members. The summit came after the European markets underwent a rarely turbulent week despite furious efforts by individual countries to contain the financial crisis and only three days away from a regular EU summit starting in Brussels on Wednesday.

    Sarkozy said eurozone leaders would present the action plan to the broader summit in order to maximize coordination among European countries.