German bank rescue failure clouds Europe
People walk past the Berlin branch of the German bank Hypo Real Estate. The bank said that a planned 35-billion-euro rescue had fallen apart. Photo: AFP
Germany weighed the fallout Sunday from the failure of the country's biggest financial rescue in history, after Europe's top four economic powers pledged a coordinated approach to the credit crunch.
German bank Hypo Real Estate (HRE) dropped the bombshell late Saturday that a planned 35-billion-euro (48-billion-dollar) rescue fell through after the banking consortium involved pulled out of the deal.
The news came as the leaders of France, Germany, Britain and Italy huddled in Paris to pledge a more coordinated approach to prevent the meltdown in US financial markets from engulfing their economies as well.
President Nicolas Sarkozy, who hosted German Chancellor Angela Merkel and prime ministers Gordon Brown of Britain and Silvio Berlusconi of Italy, vowed governments would help European banks and financial institutions in trouble.
But the leaders also called for punishing failing bank executives and urged a rapid meeting of the Group of Eight world industrialised powers to marshall a global response to the financial crisis.
While the four powers put on a united front Saturday, there was no talk of a joint bail-out fund for European banks, on the model of the 700 billion dollar US package approved Friday, after the idea was shot down by London and Berlin.
Merkel told reporters that "each country must take its responsibilities at a national level," and added: "It is important to act in a balanced way, and for countries not to cause harm to each other."
That comment appeared to be aimed at Ireland, which has issued a blanket guarantee to bank depositors without consulting its neighbours.
European Commission head Jose Manuel Barroso expressed relief after the Paris meeting, welcoming the pledge by Europe's main economies to work together as a "concrete step in the right direction," in remarks published Sunday.
"I think we did our maximum in the face of a very grave and serious situation that Europe did not create but of which it is suffering the effects," Barroso told French newspaper Le Parisien.
But Spanish commentators, many stung that their leaders were excluded from the big-four meeting, had a darker take on the meeting.
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