EU: United we stand
Brussels -- Like frightened sardines sighting a killer whale, the European Union's leaders have re-discovered strength in unity.
Now, they want to take on the world.
After weeks of dithering and patchwork responses, EU leaders meeting in Brussels on Wednesday and Thursday are to agree on a common European response to the global credit crunch.
"After a few false starts, Europe has shown that it is capable of acting," said Austrian Chancellor Alfred Gusenbauer after arriving in Brussels.
On Sunday, leaders of the 15 eurozone states met in Paris and adopted a wide-ranging rescue plan inspired by British Prime Minister Gordon Brown.
With a potential combined cost of 2 trillion euros (2.7 trillion dollars), the eurozone plan is bigger and better than a similar package approved earlier by the United States, European commentators gleefully note.
The European plan envisages guarantees designed to ensure that banks start lending again. It also allows for the partial nationalization of shaky financial institutions through a liquidity-for-shares swap.
And after a series of unilateral moves from Ireland and Germany that infuriated their neighbors, governments also agreed to unanimously raise minimum state guarantees for bank deposits, from 20,000 euros to 50,000 euros.
Such concerted action appeared to work on Monday and Tuesday, with European stock markets rallying during the two days that followed the Paris meeting.
But despite shares plunging again Wednesday amid fears of a global recession, emboldened EU leaders decided to raise the bar even further by saying they would now fix the rest of the world.
"For the first time in financial history, it is plans worked out in the European Union which have inspired the measures taken in other countries of the world, including the United States," said French President Nicolas Sarkozy, whose country holds the rotating presidency of the EU. "The system must be completely overhauled, an overhaul that must be global."
Brown gave substance to Europe’s future intentions by calling for "a ‘new Bretton Woods’."
The Bretton Woods conference of 1944 laid out the foundations of modern-day capitalism by establishing rules for the international monetary and financial order and by creating such bodies as the International Monetary Fund.
No doubt emboldened by the praise he received from fellow EU leaders, Brown proceeded to provide substance to Sarkozy’s proclamations by illustrating his recipe to fix global finances.
Brown’s four-point plan consists of a global early warning system to prevent future crisis from spreading; globally accepted standards of supervision and regulation; effective cross-border supervision of big multinational firms; and mechanism for cooperation and concerted action in times of crises.
Even German Chancellor Angela Merkel, initially skeptical about the need to forge a common European response to the credit crunch, joined in the chorus of EU leaders calling for a world summit.
"I support the idea that we should have a meeting this year, preferably in November, of the heads of state and government of the Group of Eight countries and the emerging markets, to rethink the world’s financial system and prevent any repetition of such things," Merkel said.
The 50-year-old history of the EU has repeatedly shown that its leaders are able to come together at a time of crisis.
The 1989 collapse of the Berlin Wall gave new impetus to EU enlargement and monetary union, while the terrorist attacks of September 11, 2001 finally persuaded governments on the need to have a European-wide arrest warrant.
Hugo Brady, an EU expert at the Centre for European Reform, a London-based think tank, says the bloc’s response to the credit crunch has reminded its citizens of the importance of monetary union.
All they need to do is look at non-EU member Iceland, which is facing national bankruptcy as a result of the crisis or Denmark, which has refused to join the eurozone and has now been forced to raise interest rates to defend its currency.
But Brady also cautioned leaders against becoming too self-confident.
"I would council against a premature declaration of victory," Brady told DPA. "The patient has a good chance of surviving but we don’t know yet if it will be able to walk."
— Nicholas Rigillo/DPA/Expatica