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    Europe divided ahead of Sarkozy's finance summit

    02.10.2008 - 17:38 | Son Güncelleme:

    The leaders of Europe's four biggest economies -- Britain, France, Germany and Italy -- will meet Saturday, Paris announced, amid sharp disagreement over how to respond to the global financial crisis.

    President Nicolas Sarkozy’s office said the summit would help European members of the G8 group of nations coordinate positions before next weeks meeting of rich world finance ministers in Washington.

    But the build-up to the Paris talks had already revealed deep divisions between the European powers on how to protect the banking sector, with Germany dismissing calls for a joint European fund to bail out failing banks.

    On Thursday, the Dutch government said it had come up with the idea, and France angrily denied that it had ever suggested such a plan, as had been claimed Wednesday by a European official in Berlin.

    Sarkozy himself insisted to reporters that France had not suggested creating a 300-billion-euro (417-billion-dollar) fund, and the finance ministry insisted that both the figure and the idea had come from the Dutch.

    "There was an exchange of ideas, but no French proposals. There was no French plan. There is no French fund," said an official in Finance Minister Christine Lagarde’s office, denying these "groundless accusations".

    In the Hague, government spokeswoman Hendrieneke Bolhaar said: "The Netherlands has proposed that we think it would be right for all European countries to make a reservation."

    She did not say how big such a fund would be, however. "I cannot go into the details. We are still discussing the details with other states and partners."

    Many media commentators blamed France for the confusion, suggesting Sarkozy was so keen to take credit for leading Europe’s response to the crisis that he had forged ahead with summit plans without consulting his partners.

    The French president has invited Germanys Chancellor Angela Merkel and prime ministers Gordon Brown of Britain and Silvio Berlusconi of Italy to Paris.

    European Commission president Jose Manuel Barroso, European Central Bank chief Jean-Claude Trichet and the head of the eurogroup finance ministers committee, Jean-Claude Juncker, will also attend.

    Paris has been keen to develop a European response to the credit crisis, which began when U.S. banks found themselves dangerously exposed to bad debt, and spread round the world as credit markets choked up.

    Frances European partners, however, have so far preferred unilateral and bilateral measures to protect their own institutions and are looking forward to the G7 meeting of world finance minister’s in Washington next week.

    On Wednesday, the German finance ministry dismissed talk of a joint bail-out fund. "Germany does not think much of such a plan," spokesman Torsten Albig told AFP.

    Earlier on Wednesday, Lagarde had appeared to suggest the idea of a Europe-wide fund in an interview with the German daily Handelsblatt.

    "What happens if a smaller EU state is hit by looming bank collapse? Maybe this country does not have the means to save the bank. Therefore the question of a European safety net solution comes up," she was quoted as saying.

    After Germany ruled this out, however, Lagarde told BBC television that she had not suggested the 300-billion-euro figure, while still endorsing the idea of a coordinated European response to the banking crisis.

    Lagarde said this week’s bailouts of banks Dexia and Fortis by European governments working together showed a "very decent level of coordination and a very decent level of cross-sharing of information".

    And she criticized Ireland’s announcement that it would guarantee all deposits in its own six biggest banks, saying: "A measure decided in one member state has to be shared in advance with other member states."

    Britain has also criticized Ireland’s move, fearing that Irish and British depositors will move their savings into the protected Irish banks and put British banks operating in the two countries at a disadvantage.

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