European leaders meet on financial meltdown

October 12, 2008
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, PARIS, October 12 – European leaders were due in Paris on Sunday for a summit that would mark their last chance to hammer out a coordinated financial rescue package before their panic-stricken stock markets reopen.

French President Nicolas Sarkozy, the current head of the European Union, was to host first Britain\’s Prime Minister Gordon Brown and then his 14 colleagues from the single-currency euro bloc in the Elysee Palace.

"I can assure you, you will not be disappointed and it will be specific. We collectively need to put in place some stimulus packages," French Finance Minister Christine Lagarde said in Washington.

No details have yet been confirmed, but there were signs that the 15 were leaning towards the policy already adopted in Britain under which the state guarantees inter-bank lending and buys stakes in banks.

London hopes this part-nationalisation, which has been accepted by some of its biggest institutions, will unfreeze capital and restore confidence after the worst week on world stock markets since the crash of 1929.

"I am going to Paris to persuade other European countries to adopt the comprehensive approach we have taken in Britain," Brown wrote in an article in the Sunday Mirror newspaper.

"For Europe, the stakes could not be higher and this is a moment of truth. No country — not even the biggest — can make it just on their own at a time like this. We are all in it together and have to work to solve it together."

In addition to the plans already announced, the British government is also preparing to take controlling stakes in Royal Bank of Scotland and HBOS, two of the banks worst affected by the financial crisis, reports said Sunday.

The unprecedented move would make the government the biggest shareholder in the banks and government representatives would be installed on their boards, the Sunday Times and Sunday Telegraph newspapers reported.

RBS and HBOS declined to comment on the reports, but an industry source told AFP that the banks could make an announcement on Monday.

Britain is not part of the eurozone, but Sarkozy said he wanted to meet Brown to "maximise coordination." The French leader will hold talks with Brown at 3:30pm (1330 GMT) and the other leaders will arrive at 5:00pm (1500 GMT).

Afterwards, Sarkozy will chair a news conference alongside the president of the European Commission Jose Manuel Barroso, eurozone chairman Jean-Claude Juncker and the governor of the European Central Bank Jean-Claude Trichet.

Sarkozy\’s office confirmed that there would be an emergency cabinet meeting on Monday followed by an address by the president to the nation.

A government source, speaking on condition of anonymity, confirmed that the cabinet would examine a plan to guarantee inter-bank loans.

And in Germany, Europe\’s biggest economy, press reports said that, following the meeting in Paris, Merkel\’s government would announce a rescue package worth several hundred billion euros for its banks.

Berlin is expected to guarantee interbank loans with between 300 and 400 billion euros(405 to 540 billion dollars) and to provide banks with fresh capital in exchange for shares in the banks, similar to the British plan.

At a meeting Saturday in Colombey-les-deux-Eglises, late French president Charles de Gaulle\’s home village and final resting place, Sarkozy and Merkel promised that Europe\’s response would be closely coordinated.

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