All 27 members of the European Union approved measures on Tuesday, October 7 to combat the banking crisis that is threatening to overtake the continent. The finance ministers agreed to raise guarantees for bank deposits, laid out common principles for rescuing struggling banks and temporarily relaxed accounting rules to help banks avoid fire sales.
“We will be ready to respond as the situation evolves,” said Christine Lagarde, the French finance minister, who was chairwoman of the meeting. “This is not a one-off declaratory act.”
While the group agreed to the measures, the amount of deposits to be guaranteed in each country is still up for debate. France sought to persuade the rest of the EU to raise the deposit guarantee to €100,000 from the current minimum of €20,000. Smaller countries, however, worked to lower that amount and succeeded in getting the guarantee raised to €50,000. At the same time, some individual countries indicated that they would raise their guarantees to the higher amount.
Spain and Austria announced that they would raise their deposit guarantees to €100,000, and some worried about capital flight to those countries. There are also differences between member nations about setting up a rescue fund for ailing banks, similar to the recently passed US package. Germany’s chancellor Angela Merkel is opposed to that idea, believing that her country will pay more to help other nation’s banks. Although disagreements are still evident, the actions by the EU have heartened many.
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