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Business

Europeans Fight Financial Crisis Together and Alone

Credits, guarantees, nationalization and rescue plans are some of the steps world leaders have taken to stabilize banks and stock markets. DW summarizes Europe's recent reactions to the financial crisis.

An construction sign with the Frankfurt skyline in the background

European governments have all started work on securing their banking sectors

Fallout from the US real-estate slump has western Europe facing "extraordinary financial stress," and unwinding European banks' exposure "will likely be long and arduous," the International Monetary Fund said on Wednesday, Oct. 8.

It recommended EU governments coordinate their efforts to push for responsibility and accountability in the financial sector. IMF head Dominique Strauss-Kahn said Thursday that all non-coordinated action in the European Union against the financial crisis "should be avoided, if not condemned."

"Restoring confidence now requires a decisive commitment to concerted and coordinated action to alleviate financial stresses and avoid the serious risk of backtracking on European financial integration," IMF analysts added.

Until Wednesday, when central banks around the world cut main interest rates in a coordinated effort, European nations had largely been left to their own designs in terms of solving the credit crunch after a French proposal for an EU-wide fund was shot down.

DW reviews recent steps European financial leaders have recently taken to stabilize markets and shore up the international banking system.

Germany

The words Hypo Real on an LED ticker

Hypo Real Estate needed to be bailed out twice before it was rescued

As Europe's largest economy, Germany hasn't been able to avoid the global credit crunch, despite early statements from Finance Minister Peer Steinbrueck that it was an American problem.

The government bailed out commercial property lender Hypo Real Estate to the tune 35 billion euros ($47.9 billion). To keep the bank customers from running to ATM machines to withdrawal their money, the federal government has also guaranteed the security of all savings.

Iceland

The European country most dramatically affected by the financial crisis, the entire nation of Iceland is threatened with bankruptcy after the extent of its involvement in the financial sector. By Oct. 10, the Reykjavik government nationalized banks the country's three biggest banks in a moved it said was intended to guarantee a functioning banking system.

Suffering from a lack of funds as foreign countries stop providing Iceland with loans has lead the Atlantic nation to schedule negotiations with Russia next week. Moscow has reportedly expressed a willingness to give Iceland a 4 billion euro loan. Since the beginning of the year, Iceland's currency, the krona, has lost half its value against the euro.

Ireland

Traders in Frankfurt pointing at computer screen

Look at how far that one dropped!

Dublin drew ire from the European Union for its decision in late September to guarantee all deposits at its biggest banks. Several EU nations then followed Ireland's lead and took similar measures. But experts in some European capitals were irritated that Ireland acted without consulting other nations. The Irish government, however, calmed nerves somewhat by extending blanket guarantees offered to Irish banks to five foreign institutions operating on the Emerald Isle.

Britain

British Prime Minister Gordon Brown announced his country's 50 billion pound bank rescue plan on Wednesday. The plan included the partial nationalization of Britain's eight main banks, 200 billion pounds in short-term loans and 250 billion pounds in inter-bank loan guarantees.

"Extraordinary times call for ... bold and far-reaching solutions," Brown said while introducing the package. "The global financial market has ceased to function, putting in danger the necessary flow of money to businesses and families on which all of us depend in our daily lives."

British bank stocks, in the days before the partial nationalization, had lost nearly half their value,

Italy

Giulio Tremonti

Tremonti said a bare-bones banking system has served Italy well

Italian officials have said their country's somewhat less sophosociated financial system has left it in a better position to deal with international economic turmoil.

In addition to vouching for Italians' savings, Economy Minister Giulio Tremonti said Rome would consider whether to come to banks' aid on a case-by-case basis. Italian media reported that the government was setting up a 50 billion euro rescue package that would save banks if necessary.

France

As two of French banks engaged in merger discussions that would result in the country's largest banking group, Paris issued plans Wednesday to take stakes in troubled banks to keep them from bankruptcy.

Prime Minister Francois Fillon said the government would create new structures allowing it to take over at failing banks and ensure the "continuity and stability of the French banking and finance system." He also said Paris would have no qualms about replacing managers at nationalized banks with officials who enjoyed the finance ministry's trust.

Belgium

A man is seen at a branch of the Dexia bank in Brussels

Much of the private sector turned its back on Dexia

Belgium turned to former Prime Minister Jean-Luc Dehaene is to head the board of the struggling Franco-Belgian financial service group Dexia. BNP Paribas exec Pierre Mariani is slated to serve as chief executive.

The group was saved Thursday when the Belgian, French and Luxembourg came to its rescue for the second time in two weeks by guaranteeing loans after having already partially nationalized the local credit institute. Dexia shares had lost nearly two-thirds of their value before the announcement.

But Dexia isn't the only Benelux bank to be affected. The Netherland nationalized their portion of the former Belgian-Dutch insurance and banking giant Fortis while France's BNP Paribas and the Belgium and Luxembourg governments took over the remainder of Fortis' activities.

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