German Chancellor Angela Merkel stressed on Tuesday that Europe must unite to combat the financial crisis — but again rejected the idea of a Europe-wide bailout fund, and criticized Ireland’s unilateral move to set up a sweeping bank guarantee.
Merkel welcomed a commitment by EU governments to rescue failing banks in their countries that could affect other nations.
“We must be able to rely on that in Europe,” she told parliament. “Of course we need coherent, common action.”
She pointed to divisions across Europe over wider-ranging efforts to stem problems on the continent. EU governments have avoided copying the US with a massive bailout to buy up bad debt from banks and help unfreeze lending.
“Of course, the question arises of how national actions can be enmeshed with European ones, and I want to say which ways are not appropriate from my point of view,” Merkel said.
She singled out “the Irish way — stretching a shield over one’s own financial institutions, not including other international institutions that also have long paid taxes in Ireland, and so producing competitive distortions that, from my point of view, are not acceptable in an internal market.”
Ireland guaranteed not only 100 percent of bank deposits but loans to its banks from other banks. British banks have criticized the move as anticompetitive.
Merkel said it was also unacceptable for “27 member states to set up a shield and everyone to pay into a fund, in order then ... to conduct crisis management in individual member states.”
She said such a fund “is not conducive to a fast ability to act.”
Merkel has portrayed a pledge her government made on Sunday to guarantee all private bank deposits as in line with European efforts to act together.
She repeated the pledge on Tuesday, declaring: “I say again here that this statement stands.”
On Sunday, the German government helped put together a rescue package for distressed commercial property lender Hypo Real Estate AG (HRE) worth US$69 billion.
Merkel said doing nothing would have resulted in “unpredictable” consequences and noted that her government had pressed for a change of management. She welcomed HRE’s announcement of CEO Georg Funke’s resignation.
“We think that this is the necessary precondition for re-establishing confidence in this company, and we are betting that this will succeed,” she told lawmakers.
Later on Tuesday, HRE announced that Axel Wieandt, 42 — currently global head of Deutsche Bank AG’s corporate investments division — will take over as the new CEO on Oct. 13.
Merkel said the crisis underlines the need for moves such as better regulation of rating agencies — along with more effective use of laws by which managers can be called to account for malpractice and new legislation if necessary.
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