EUOBSERVER / WEEKLY AGENDA (5 – 12 October) – This week will start with a meeting of the EU’s economy and finance ministers (ECOFIN) in Luxembourg on the need for a European response to the international financial crisis, just a day after the bloc’s four biggest states - Germany, France, Britain and Italy – hold emergency talks on the subject in Paris.

The ECOFIN meeting on Tuesday (7 October) is expected to highlight the need for co-operation and cohesion among EU states on the issue, as well as the necessity of constructing a “structural response” to the crisis, rather than taking ad hoc actions.

The ministers will also underline the need to respect the so-called Stability and Growth Pact (SGP) – the rules underpinning the euro, following comments coming from some EU capitals that tackling the crisis should take priority over keeping budget deficits in line with EU rules.

“[The SGP rules] are temporarily not the priority of priorities. The priority is to save the global banking system and the savings of citizens. There is no other choice,” Henri Guaino, a close adviser of French President Nicolas Sarkozy told French television channel Canal Plus on Thursday.

The meeting – which will be preceded on Monday by a meeting of the economy and finance ministers from EU countries using the euro – will also assess the impact of the crisis on banks and insurance companies, as well as on small and medium-sized enterprises.

===============

France believes EU-level measures may have to be cobbled together to aid banks in smaller member states, while denying rumours of a €300 billion package. But Germany has indicated it would not support any European “big-bang” deal.

“What happens if a smaller EU state is hit by a looming bank collapse? Maybe this country does not have the means to save the bank,” French finance minister Christine Lagarde told the Handelsblatt in an interview published on Thursday (2 October). “Therefore the question of a European safety net solution comes up.”

The safety package may be presented by French President Nicholas Sarkozy at a 4 October meeting between himself, the prime ministers of Germany, Italy and the UK, as well as Eurogroup chief Jean-Claude Juncker and European Central Bank president Jean-Claude Trichet.

Reports have it that the Netherlands is the source of the €300 billion proposal. The country quickly denied this was the case.

But any suggestion of a European version of US treasury secretary Henry Paulson’s $700 billion bail-out plan for Wall Street is being stiffly resisted by Berlin. In an interview with German daily Bild, Chancellor Angela Merkel said she opposed writing “blank cheques” for banks.

“The idea of applying one solution, one big bang … is not practicable and would create new, enormous problems,” German finance ministry spokesperson Torsten Albig told reporters yesterday in Berlin. “Germany does not think much of such a plan,” he said, according to AFP.

European Commission president Jose Manuel Barroso on Thursday welcomed the approval of the package by the American Senate, which had enabled another attempt to hammer out the bill in the House of Representatives and described it as “a good step forward in the right direction.”

But after receiving negative signals from both Berlin and London on the idea of a similar emergency fund worth €300 billion for Europe’s banking sector, French president Nicolas Sarkozy distanced himself from the proposal.

A day later Sarkozy said: “I deny the sum and the principle,” according to media reports. And from Christine Lagarde’s office:  “there was an exchange of ideas but no French proposals. There was no French plan,” AFP says.

Asked by journalists about a possible EU version of the US banking rescue scheme on Thursday, the European Central Bank (ECB) president Jean-Claude Trichet - also to attend the Paris mini-summit together with commission chief Barroso - openly said it would not work for Europe. “We do not have a federal budget, so the idea that we could do the same as what is done on the other side of the Atlantic doesn’t fit with the political structure of Europe.”

Britain has suggested that solutions to the financial crisis need to be primarily sought by national authorities. “It is right that individual countries would want to take their own decisions, particularly when national taxpayers’ money is potentially at risk,” said spokesman of Gordon Brown, UK’s prime minister: “The purpose of the [Paris] meeting will be to discuss how each of the four major economies in Europe are responding to the global financial crisis,” he added, according to the BBC.

The Irish parliament on Thursday passed a bill fully guaranteeing all bank deposits, which has sparked a controversy in other European capitals about unfair advantage for Irish banks over foreign competitors.

British media reported a rising interest among Brits to switch from the UK’s to Ireland’s banks in a bid to secure their savings in a rising atmosphere of insecurity. Minister Lagarde said in a BBC live interview that better European co-ordination could prevent such cases, arguing that “a measure decided in one [EU] member state has to be shared in advance with other member states.”

EU competition spokesman Jonathan Todd said his department still hadn’t received any formal explanation from Ireland about how its bank insurance programme would work, meaning it was still uncertain whether or not the EU will even clear the Irish move as legal.

The Guardian says that Greece has followed Ireland in offering a guarantee on deposits in all banks operating in the country, after it says savers were getting restless. The paper goes on to say that it puts EU leaders in a difficult position ahead of an emergency summit in Paris on Saturday to find a common response to the crisis.

Meanwhile, Deutsche Welle says that on Thursday the European commission gave the go-ahead to Germany for a €35bn deal to bail out mortgage lender Hypo Real Estate.

And El País says that the EU is struggling to come up with a common response to the financial crisis, with individual member states taking unilateral action to save their own banks: the UK (Bradford and Bingley and Northern Rock), France and Belgium (Dexia), and Belgium, the Netherlands and Luxembourg (Fortis).

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France and Germany at odds over EU ‘Paulson Plan’ - 02.10.2008

—————————————————————————-
France believes EU-level measures may have to be cobbled together to aid
banks in smaller member states, while denying rumours of a €300 billion
package. But Germany has indicated it would not support any European
“big-bang” deal.

 http://euobserver.com/9/26851/?rk=1

****
EU big four gather for financial crisis talks - 03.10.2008

—————————————————————————-
The leaders of the EU’s four biggest states - Germany, France, Britain and
Italy - are gathering for emergency talks on the financial crisis in Paris
on Saturday, one day after US lawmakers are expected to vote on an amended
bail-out plan. But France says there will be no US-type rescue package for
the EU.

 http://euobserver.com/9/26857/?rk=1

From The European Parliament - September 30, 2008:   Europe props up crumbling banks.

European governments were forced to rescue a number of financial institutions hit by the US-born crisis, sending stock markets plummeting, reports Deutsche Welle.

Washington’s rejection of a 700 billion dollar bailout caused world markets to plummet, it says.

Only a few weeks ago, banks in the eurozone financial sector were said to be safe from the US-born financial crisis, but now, as the global financial situation gradually worsens, five European governments have had to step in to prop up financial institutions, the paper goes on.

France is to inject €1bn into ailing Franco-Belgian bank, Dexia, which will receive €6.4bn in total, with the rest made up from donations from Belgium and Luxembourg, according to Le Figaro.

In Ireland, meanwhile, the government has placed a two-year guarantee on all deposits and certain debts in six major Irish banks, says the Irish Times, in a move it says is to “safeguard the Irish financial system”.

—————

Europe scrambles to save banking system: Banking stocks took a major hit across Europe after news the US bailout had failed.

LEIGH PHILLIPS, The EUobserver, September 30, 2008.

European authorities in Brussels, Frankfurt and at EU member state level are scrambling to save the continent’s financial system after bank stocks plunged when US lawmakers rejected a $700 billion bailout of Wall Street on Monday (29 September).

Banks are petrified of lending to one another for more than one day, requiring central banks to flood their coffers with the money they need to stay in business.

After yesterday’s part-nationalisation of Belgo-Dutch banking giant Fortis and the nationalisation of the UK’s Bradford & Bingley, Belgium-based Dexia, the biggest provider of lending to local governments in the world, could be the next financial institution to be rescued by taxpayers.

In an email from Belgian Prime Minister Yves Leterme, the country’s federal government reached an agreement with Belgium’s regional assemblies to jointly support the bank, Bloomberg News reported.

Even French President Nicolas Sarkozy has joined the rescue operation, despite the bank being headquartered in Belgium, issuing directions that the state investment body Caisse Des Depots offer Dexia funds.

***

Elsewhere, the German government backed by a series of private banks bailed out collapsing mortgage lender Hypo Real Estate reportedly to the tune of €35 billion, according to the German Ministry of Finance.

The list of nationalisations is rapidly growing, with Iceland - not an EU member state - also nationalising the country’s third largest bank, Glitner. The government has taken out a 75 percent stake in the firm in return for €600 million.

The Icelandic bailout is a larger per capita rescue operation than even the failed US $700 billion plan, representing some €2,000 for every Icelander. Following the move, the Icelandic Krona dropped to its lowest level ever against the euro.

***

Russia’s Prime Minister, Vladimir Putin, has rushed to the forefront in the crisis, announcing authorities will offer domestic banks a fresh $50 billion atop the $120 billion already supplied.

***

In perhaps the most frightening development, banks have deposited some €28 billion with the European Central Bank, afraid of leaving it stashed anywhere else, according to reports in the UK’s Daily Telegraph, quoting Hans Redeker, currency chief at France’s BNP Paribas.

“The ECB is no longer able to inject liquidity because the money is just coming back to them again,” the British paper quotes the banker as saying.

***

Bank stocks plunge:

Meanwhile, European bank stocks dropped through the floor on Monday, with Germany’s Aareal and Commerzbank particularly badly knocked down, taking a 42 percent and 22 percent hit to share prices. Ireland’s Anglo-Irish Bank was down 46 percent and Allied Irish down 16 percent.

Italy’s Unicredit, Sweden’s Swedbank and France’s Natixis all took a bruising as well, while a host of smaller banks in Denmark are set to collapse, according to the Financial Times. Spanish operations too are struggling.

On Monday, the European Banking Federation tried to reassure citizens that the financial sector was on a sound footing despite the crisis, and that depositors’ savings were not at risk.

“The global economy is facing an unprecedented crisis which is generating a certain degree of anguish due to the financial failure of some major banks,” the EBF said in a press statement.

“The European banking system will weather the storm,” the statement read, adding: “In EU countries retail deposits are insured.”

***

EU timetable:

French President Nicolas Sarkozy will meet bank and insurance company directors on Tuesday to assess the financial sector’s situation in his country, his office announced.

European Commission President Jose Manuel Barroso also said that a “structural European response” was currently being prepared for the summit of European leaders in two weeks’ time.

Additionally, on Wednesday, EU internal market commissioner Charlie McCreevy is to unveil a tripartite reform of European banks’ capital requirements.

———————-

Russia has a monetary surplus - will this now become its entree card to a tighter relationship with the EU?

Is this the beginning of a realignment that will see a Europe-Russia new economic bloc and a US-China economy tie-up?

From:    cbsdpconsultant-climatechange at yahoo.c…
Subject: Fw: Now online: FMR31 Climate change and displacement issue
Date: September 28, 2008
The FMR journal on CC & displacement can now be downloaded below.

James S. Pender
Development & Natural Resource Management Advisor
(with Church of Bangladesh Social Development Programme)

Forced Migration Review issue on Climate change and displacement.

This 80-page issue of Forced Migration Review (FMR), published by the Refugee Studies Centre of Oxford University, includes a major focus on climate change and displacement and is now online at: http://www.fmreview.org/climatechange.ht… (We’ve just revamped our website - you may need to click ‘refresh’.)

***

In response to growing pressures on landscapes and livelihoods, people are moving, communities are adapting. This issue of FMR debates the numbers, the definitions and the modalities – and the tension between the need for research and the need to act. Thirty-eight articles by UN, academic, international and local actors explore the extent of the potential displacement crisis, community adaptation and coping strategies, and the search for solutions.

***

We would like to thank the following for their generous funding and support of this issue: UNEP, the Swiss Federal Department of Foreign Affairs, GTZ/the German Federal Ministry for Economic Co-operation and Development, UNOCHA and the International Centre for Migration, Health and Development.

This issue will be published in English, French, Spanish and Arabic. The English print edition will be mailed out to you in early October.

FMR would appreciate your help to maximise the impact of this issue. We would be grateful if you would forward this message to anyone you know who may be interested, add links on your website and/or list it in your updates and resources. Thank you.

Two other resources just launched which may be of interest to you are:
- Forced Migration Online Resource Summary on climate change and displacement, online at http://www.forcedmigration.org/browse/th…
- transcript of April 2008 ippr conference on climate change and displacement, online at http://www.ippr.org/migration

With best wishes

Marion Couldrey & Maurice Herson

– —- –
Marion Couldrey & Maurice Herson, Editors
Heidi El-Megrisi, Coordinator

Refugee Studies Centre, Department of International Development,
University of Oxford, 3 Mansfield Road, Oxford OX1 3TB, UK
 fmr at qeh.ox.ac.uk   href=”http://www.fmreview.org” title=”http://www.fmreview. ” target=”_blank”>www.fmreview.org Skype: fmreview
Tel: +44 1865 280700 Fax: +44 1865 270721

Banking crisis claims Belgo-Dutch giant.
LEIGH PHILLIPS, The EUobserver, Monday, September 29, 2008.

The global banking crisis, born across the Atlantic, again sent waves crashing into Europe on Sunday (29 September) as the Belgian, Dutch and Luxemburg governments partly nationalised Belgo-Dutch banking and insurance giant Fortis in an €11.2 billion bailout.

The move was announced on Sunday evening by Belgian Prime Minister Yves Leterme, following a marathon weekend of talks between the three governments and European Central Bank chair Jean-Claude Trichet.

Belgo-Dutch bank Fortis is the latest recipient of tax-payer bailouts in the financial sector.

“We have taken up our responsibility, we did not abandon the savers,” Mr Trichet told reporters.

The deal will see the Benelux governments purchase 49 percent of the bank’s operations in each of the three countries. Belgium is to take on the biggest load, offering €4.7 billion towards the acquisition, with the Netherlands paying €4 billion and Luxembourg €2.5 billion.

The move comes after shares in Fortis plunged sharply in the last two weeks, losing more than a third of their value. Over the past year, shares in the bank - whose assets are many times larger than Belgium’s GDP - have lost some three quarters of their value.

The Belgian and Dutch governments have also said they will guarantee 100 percent the deposits of clients. Normally in the two countries, only an initial €20,000 is guaranteed by the state.

The governments had hoped to avoid any moves towards nationalisation of the bank and were attempting to piece together a purchase of Fortis - or at least part of it - by Dutch bank ING or BNP Paribas in France.

Negotiations broke off with the two banking groups when the Benelux governments refused to accede to demands that they offer guarantees against future losses.

***

Trouble at mill

Meanwhile in the UK, the government is set to nationalise troubled West Yorkshire-based bank Bradford & Bingley, according to British press reports.

The UK’s finance minister, Alistair Darling, has convinced Spanish bank Santander to purchase some 200 of Bradford & Bingley’s branches and €28 billion (£22 billion) in savings, while the UK government is take over €52 billion (£41 billion) of the bank’s mortgages, according to UK daily the Guardian.

The move significantly expands Santander’s presence in the UK, as it already owns Abbey and is in the process of purchasing Alliance & Leicester.

***

In Germany, troubles at lender Hypo Real Estate are also the subject of emergency talks between German banks and domestic authorities.

A possible rescue of the Munich-based bank is under consideration, while Reuters - quoting an unnamed source close to the discussions - is reporting that the group has received a credit line of some €35 billion from a consortium of private and public-sector banks in the country.

==============================

UK economists think mainly like US economists - call it an Anglo-Saxon bias. So, it takes outsiders to see through the maze - some of them also use the Financial Times for their sounding board. We have a collection of those other articles in a separate posting of Financial Times, September 29, 2008 printing. Here we present articles that still propose to take the US bailout for a possible example of how to deal with its overseas ramifications in Europe.

Sovereign funds AS VEHICLE to FINANCE the global economy.

Consideration should be given to the creation of an international system wherein sovereign funds (and/or those of affiliates) spent outside their native countries are restricted to only lending to public and private business enterprises subject to an international regulation, control, and oversight regime and subordinate to those of the nations where the loans are made.

This would:
(1) Provide additional liquidity and capital to the international financial system, maintain markets, and reduce the risk of regional and/or worldwide recession;
(2) Overcome the valid concerns ( economic, financial, security, political, etc.) and fear of sovereign funds buying up a country’s manufacturing, and service companies, agricultural enterprises, natural resources, banks, financial institutions, and technology and knowhow (industrial, military, scientific, nuclear, etc.) and engaging in economic aggression.
(3) Reduce the risk of protectionism and strife.

To protect and preserve the capital of sovereign fund banks, their off shore loans could be secured by the credit of the borrower and/or the nation, state, or municipal government where the borrowing enterprise is located, possibly as part of economic/job development financing programs.
This approach would satisfy the concerns and requirements of all parties, supply the capitol the global economy needs to function equitably and efficiently, and encourage greater sovereign fund domestic investment to improve the educational, infrastructure, and living standards at home.

This could be accomplished through:
(1) U.N. regulations prohibiting any member nation from allowing sovereign funds (or their affiliates), either directly or indirectly, to acquire any kind of asset in their country – only lend;
(2) individual countries collectively enacting standardized legislation to prohibit sovereign funds (or their affiliates) from acquiring or purchasing stock, bonds, or equity, either directly or indirectly, in the manufacturing, mining, agriculture, or service enterprises, technology, research, intellectual and real property, patents or copyrights in their country and set lending guidelines;
(3) the U.N. requiring all of its members to comply with all international patent and copyright laws; and
(4) the establishment (or empowerment) of an international oversight and regulatory banking commission, like the IMF, World Bank, World Trade Organization, European Trade Commission, or OECD to: (a) govern sovereign fund foreign lending, (b) set uniform regulations and standards for international bank and hedge fund reserve, transparency, disclosure, credit rating, and due diligence, etc. and (c) prohibit any interference or influence by sovereign funds (or their affiliates), either directly or indirectly, in the governments or politics of any country other than their own.

Private banks, financial institutions or consultants could assist sovereign funds in arranging and servicing said foreign loans on a fee basis.

Harry L. Langer           Tel: 212-517-5942     E-mail:  harrylanger at hllanger.com

 Obama and McCaine - Wake Up - It Is Not For You To Save The World Anymore - Bush Already Buried It.

‘Laissez-faire’ capitalism is ‘finished,’ says France. Germany talks of a “multi-polar” world {that we assume will have its center-point in Asia}.
ELITSA VUCHEVA, the EUobserver, September 26, 2008.

Both France and Germany on Thursday (25 September) said the current financial crisis would leave important marks on the world economy, with French president Nicolas Sarkozy declaring that the under-regulated system we once knew is now “finished,” and German finance minister Peer Steinbruck saying the crisis marks the beginning of a multi-polar world, where the US is no longer a superpower.

“The all-powerful market that always knows best is finished,” says France’s president.
Speaking to an audience of some 4,000 supporters in Toulon, France, Mr Sarkozy said the financial turmoil had highlighted the need to re-invent capitalism with a strong dose of morality, as well as to put in place a better regulatory system.

“The idea of the all-powerful market that must not be constrained by any rules, by any political intervention, was mad. The idea that markets were always right was mad,” Mr Sarkozy said.

“The present crisis must incite us to refound capitalism on the basis of ethics and work … Self-regulation as a way of solving all problems is finished. Laissez-faire is finished. The all-powerful market that always knows best is finished,” he added.

He accused “this system that allows the ones responsible for a disaster to leave with a golden parachute” of having “increased inequality, demoralised the middle classes and fed [market] speculation.”

***

A European response:

The French president also criticised “the logic of short-term financial profit” and said risks were hidden “to obtain ever more exorbitant profits” – something which, he said, was not the true face of capitalism.

“The market economy is a regulated market … in the service of all. It is not the law of the jungle; it is not exorbitant profits for a few and sacrifices for all the others. The market economy is competition that lowers prices … that benefits all consumers.”

The speech by Mr Sarkozy, who is also the EU’s current president-in-office, echoes similar statements he made earlier this week, when he called for an international meeting to discuss the crisis before the end of the year.

On Thursday, he also called on Europe to “reflect on its capacity to act in case of an emergency, to re-consider its rules, its principles,” while learning the lessons from what is happening worldwide.

Mr Sarkozy said: “For all Europeans, it is understood that the response to the crisis should be a European one.”

“In my capacity of president of the Union, I will propose initiatives in that respect at the next European Council [15 October],” he added.

‘The world will never be the same again’

Meanwhile, German finance minister Peer Steinbruck criticised the US for failing to act in the wake of the crisis and said it would now lose its status of “superpower.”

“It is a discussion that we have had for a long time in Europe, that the completely unregulated parts of the international financial market must be more closely monitored and that we must try to reach an agreement on common regulations,” he said during a visit to the New York Stock Exchange on Wednesday, according to Forbes.

Capitalism must be more regulated, says Sarkozy.
ELITSA VUCHEVA, The Euobserver, September 24, 2008

French president Nicolas Sarkozy, whose country currently holds the rotating EU presidency, on Tuesday (23 September) {in his speech before the UN General Assembly in New York City} called for an international summit to tackle the global finance crisis and its consequences, saying that capitalism should be more “regulated.”

“Let us build a capitalism where ratings agencies will be subject to controls and punished when necessary, where transparency of transactions will replace opaqueness. The opaqueness is such today that we have difficulty understanding even what is happening,” Mr Sarkozy said in a speech to the UN General Assembly, Reuters reports.

Mr Sarkozy denounced “a crazy system which has been our system for years.” (Photo: United Nations)

“I am told ‘We don’t know who is responsible.’ Oh yeah? Well let me tell you that when things were going well, we knew who got bonuses. What a strange system,” he also told journalists, denouncing “a crazy system which has been our system for years.”

Mr Sarkozy hopes to see an international meeting to discuss the crisis, the worst the world has seen, he said, since the Great Depression.


***

“I’m convinced that it’s the duty of heads of state and government of the countries most directly concerned to meet before the end of the year to examine together the lessons of the most serious financial crisis the world has experienced since that of the 1930s,” Mr Sarkozy said before the UN General Assembly, in his first public statements on the financial crisis.

At a press conference later in the day, he said he was thinking of a G8-format summit in November, gathering the world’s eight leading economic powers – namely the United States, France, Britain, Germany, Italy, Japan, Canada and Russia, but also open to “emerging countries,” such as China, India, and Brazil.

Mr Sarkozy did not specify where the summit should take place, saying that it could be anywhere from Washington or New York, to London, Brussels and Paris.

***

More regulation:

Additionally, the French president suggested a general overhaul of the financial system should be considered, where capitalism would be more “regulated.”

“Let us rebuild together a regulated capitalism in which whole swathes of financial activity are not left to the sole judgment of market operators, in which banks do their job, which is to finance economic development rather than engage in speculation,” he was reported as saying by Deutsche Welle.

His comments come just a day after MEPs also called on the European Commission to come up with legislation plans to regulate the activities of hedge funds and private equity funds.

***

However, EU internal market commissioner Charlie McCreevy told MEPs he did not believe it was “necessary at this stage to tar hedge funds and private equity with the same brush as we use for the regulated sector. The issues relating to the current turmoil are different.”

One should “analyse the impact of the existing EU provisions and of additional member states’ rules in this field before one embarks on introducing any new legislation,” said the commissioner.

***

EU-Russia economic space:

Separately, the EU president-in-office also suggested establishing “a common economic space that would unite Russia and Europe.”

However, the French president also referred to Russia’s war with Georgia this summer and underlined that the EU “cannot compromise on the principal of sovereignty and independence of states.”