EURO ZONE COUNTRIES will unveil in the coming days the specific measures they plan to take to shore up their banking systems after agreeing in Paris to a common approach to refinance banks and guarantee inter-bank lending.
The key measures announced were a pledge to guarantee new bank debt issuance until the end of 2009; permission for governments to shore up banks by buying preferred shares; and a commitment to recapitalise any "systemically" critical banks in distress.
France, Germany, Italy and other countries will announce national measures tomorrow, French President Nicolas Sarkozy said.
"The euro zone countries will grant public guarantees to bank refinancing operations until December 31, 2009."
"This temporary measure, up to December 2009, will be paid for at market conditions. We are not handing out a gift to banks. We are enabling banks to operate."
"Member states, if they so wish can recapitalise banks by subscribing to preference shares or similar assets," he said
The German Chancellor Angela Merkel said: "We agreed on a common approach as far as the basket of instruments is concerned and each country can now use this basket in the way it sees fit for its own needs.
"We believe that with this common basket of instruments we can get the financial crisis under control and set rules that allow the markets to function again. This is our goal. We will put these measures into practice tomorrow in order to keep the economy running, to ensure the safety of our citizens assets and to stabilise the financial system.
"Germany will finalise its special package of measures tomorrow . . . and do it together with France. We have agreed on that."
Mr Sarkozy said governments were ready to take stakes in banks and that details would be announced at national level, to start with in Paris, Berlin and Rome, on Monday.
The leaders pledged to help or directly subscribe to debt-raising by banks for periods of up to five years to complement efforts by the European Central Bank to unfreeze inter-bank lending markets.
European Commission President Jose Manuel Barroso confirmed that point at the news conference held with Mr Sarkozy and others.
What emerged from the Paris summit looked similar to the existing Irish and British plans in many respects, though no figures were mentioned and it was not immediately clear whether governments in the euro zone were planning to underwrite inter-bank lending. Ireland has guaranteed inter-bank lending and Britain's rescue plan makes available 50 billion pounds ($86 billion) of taxpayers' money for injection into its banks and, crucially, calls for underwriting inter-bank lending.
