EUROPEAN REACTION:THE EUROPEAN Commission has called on the US to live up to its "special responsibility" and pass a $700 billion bailout plan to stabilise the global financial system.
“The turmoil that we are facing has originated in the United States. It has become a global problem. The US has a special responsibility in this situation,” said the commission’s chief spokesman.
“The US must take its responsibility in this situation and must show statesmanship for the sake of their own country and for the sake of the world.”
The commission’s comments reflect growing frustration in Europe that the refusal by US Congress to endorse the bailout plan is seriously destabilising Europe’s financial sector.
French president Nicolas Sarkozy will meet the leaders of Britain, Germany, Italy, commission president Jose Manuel Barroso and ECB president Jean-Claude Trichet this week to thrash out ideas on how best to respond to the crisis and tighten EU regulations.
EU leaders have so far refused to create the sort of joint bailout fund envisaged by the US administration, leaving any action up to individual member states.
This fits with the EU regulatory model, whereby national supervisors and governments continue to deal with banks based on their territory, even when they operate across multiple EU borders.
Internal markets commissioner Charlie McCreevy will propose today a new regulatory structure called “colleges of supervisors” designed to strengthen the system of cross-border banking supervision.
He is also expected to force issuers of asset-based securities to make a 5 per cent charge on their balance sheet on securitised loans to try to avoid the type of defaults that arose from the US subprime mortgage market.
But the tensions that emerged at the weekend between Belgium, Luxembourg and The Netherlands over the bailout of Fortis, which operated in all three countries, is likely to put the whole issue of an EU banking regulator back on the European agenda.
One senior official said that the current global crisis may cause some member states to change their mind on the merits of having one regulator that could have a proper oversight of pan-EU operations.
The idea would face opposition from states that like to promote national champions and from small states that fear an EU regulator may not protect their own interests.
This week’s meeting between Mr Sarkozy and the EU leaders from G8 states will be followed by a meeting of EU finance ministers next Tuesday.
The financial crisis will also be top of the agenda of an EU summit, which begins on October 15th.