European Union leaders will take "all the necessary steps" to ensure the stability of the bloc's financial system and protect citizens' savings, an EU statement said Monday, Oct. 6.
European leaders said they will take all necessary steps to protect euro zone banks
Such measures would include the injection of liquidity by European central banks, bail-outs for troubled banks and guarantees for deposits, the joint statement said.
Noting that no European depositor had lost their savings so far, the EU leaders called for "coordination and close cooperation" in dealing with the effects of the global credit crunch.
The unprecedented statement came as European stock markets tumbled and as finance ministers from the 15 EU countries that share the euro were holding talks in Luxembourg on ways to deal with the continent's exploding financial crisis.
Member states have hitherto reacted individually to events in their own countries, but the urgency of the crisis has sparked a rising chorus of calls for coordinated action.
"I think it's extremely important that European countries use similar principles in how they treat banks in problems (sic), for example, how they intervene, what time they intervene, what policy measures they are prepared to apply," Dutch Finance Minister Wouter Bos said ahead of the meeting in Luxembourg.
Europe works towards a common approach
Almunia was confident of a EU coordinated action
Officials from the EU's executive echoed that call, with EU Economic and Monetary Affairs Commissioner Joaquin Almunia saying: "We should have a common approach, coordinated action, to avoid unilateral decisions that create negative spillovers."
But the decision by the German government on Sunday to offer a blanket savings guarantee to private depositors has piled the pressure on other EU member states to follow suit.
Austria, for instance, raised its guarantees on savings deposits late Sunday, just hours after the German plan was announced. Sweden and Denmark raised their guarantees on Monday morning.
While insisting that Austrian banks were sound, Austrian Finance Minister Wilhelm Molterer said the government had taken the decision "to avoid a competitive disadvantage with Germany, so that savings deposits do not flow off to Germany."
German plan up for discussion
Merkel's government has pledged to protect investors
German officials appeared under pressure to explain their actions after earlier criticizing an Irish guarantee, with Bos saying that the German plan "is one of the issues on the table here."
But German deputy finance minister Joerg Asmussen stressed that "Germany's approach is fundamentally different from the Irish one. They set up a rescue shield which basically discriminates in the internal market, while Germany's approach is aimed at making sure that no depositor loses a single euro."
About a third of the 15 EU countries that share the common currency have already moved to safeguard bank deposits in some way or other - among them Germany, Austria, Greece, Ireland and Belgium.
But after a meeting of the leaders of the EU's four biggest economies in Paris on Saturday, proposals for setting up an EU-wide rescue fund appeared to have been taken off the table.
"I don't think there's going to be anything near consensus about a European fund. I hope there is going to be a consensus about a common approach, on principles that should be applied whenever we want to intervene or whenever we want to help banks in problems (sic)," Bos said.