Europe says US lawmakers have to face up to the crisisImage: AP
DW staff (jc)
September 30, 2008
As the US financial crisis continues to unsettle global financial markets, Brussels has said American legislators need to start meeting their obligations. But will the strong words have any effect?
In an unusually strong statement, the European Union has called American lawmakers to order for failing to reach agreement on a $700 billion plan to shore up foundering financial institutions and markets.
"The US must take its responsibility in this situation, must show statesmanship for the sake of their own companies and for the sake of the world," European Commission spokesman Johannes Laitenberger told journalists.
European Union Trade Commissioner Peter Mandelson said US lawmakers had "taken leave of their senses" in their failure to pass the rescue measure.
"I hope that in Europe we will not see politicians and parliamentarians replicating the sort of irresponsibility and political partisanship that we have seen in Washington," Mandelson said in an interview with the BBC.
German Chancellor Angela Merkel urged the US to support the measure, saying its quick passage "is the precondition for creating new confidence on the markets" and "of incredibly great significance."
The statements came after the US House of Representatives narrowly rejected the bailout plan on Monday, September 29.
Much of the world, as well as the Bush administration, had assumed that representatives would pass the package. But many members of the House from both parties, fearful of repercussions from voters in November's national elections, refused to support it.
Europe as an example?
Laitenberger drew a contrast between the lack of a US response and moves taken by European authorities.
"The system is coping, and therefore we can also have confidence that it comes up with the right answer," Laitenberger said.
On Tuesday, the governments of France, Belgium and Luxemburg announced a 6.4-billion-euro ($9.2 billion) financial injection to support Dexia, a retail bank with some 5.5 million customers. As part of the deal, two bosses of that institution stepped down from their posts.
"All the necessary measures will be taken to preserve the interests of Dexia's depositors," Belgian Prime Minister Yves Leterme said. "Our ambition was to have very strong political involvement in order to send a signal to the markets."
The Dexia bailout came just hours after the Netherlands, Belgium and Luxemburg agreed to partially nationalize banking giant Fortis, supplying some 11.2 billion euros ($16 billion). On Monday, the German government too provided the country's second largest commercial property lender, Hypo Real Estate Holding, a line of credit of up to 35 billion euros ($51.2 billion).
French President Nicolas Sarkozy has also been busy urging top banks to keep credit lines open to the French economy.
Markets on a knife edge
The Dexia bailout became necessary after the bank's stock plummeted nearly 30 percent on Monday, reaching an all-time low.
And Tuesday was another roller-coaster ride for European stock market brokers.
All the major European indexes opened with dramatic losses, as investors expressed their disappointment at the US failure to agree upon the bailout plan.
But markets rebounded during the course of the day amidst hope that US lawmakers would ultimately be forced to intervene to stop the crisis.
The exchanges in London and Paris were up just under two points, while the DAX in Germany posted a modest gain of 0.4 percent.