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EU summit seeks joint response to financial crisis
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10:39, October 15, 2008

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European Union (EU) leaders will try to seek a joint response to the escalating financial crisis when they meet in Brussels on Wednesday and Thursday.

On the eve of the summit, European Commission President Jose Manuel Barroso renewed his call on the 27 EU member states to get united in tackling the financial crisis.

"To try and go it alone in this climate would be a fatal mistake for any government anywhere in Europe. This is an unprecedented crisis... this is something that requires unprecedented EU action," Barroso told reporters on Tuesday.

The regular EU summit in autumn is held at difficult times as the European financial markets have seen extreme turbulence in the past weeks.

The financial storm, which originated in the Untied States, is taking its toll on Europe.

With banks and other financial institutions falling prey to the global credit crunch, European governments were forced to rely on emergency measures to restore stability and confidence.

So far, EU member states have acted independently in response to the crisis, creating the impression of disorder and sending confused signals to financial markets.

Despite great efforts by individual European countries to bail out their troubled banks and the injection of billions of euros into the financial system by the European Central Bank, their piecemeal and ad hoc nature has weakened the impact.

Calls for Europe-wide action in tackling the financial crisis strengthened after Europe's major markets experienced their darkest days last week, with FTSEuro first 300 index of top European shares down 22 percent for the whole week.

In an urgent bid to find solutions, leaders from the 15 EU countries that use the euro met in Paris for their first ever meeting on Sunday, only three days away from the larger EU summit.

The eurozone leaders hammered out a joint action plan, which would see European governments buy in banks to boost their finances and temporarily guarantee bank refinancing to ease the credit crunch, similar to the British bailout package.

In line with the action plan, several eurozone countries led by Germany and France launched their most united defense so far against the financial crisis on Monday, pledging more than 1 trillion euros (1.35 trillion U.S. dollars) to save troubled banks.

Britain also joined the move by injecting billions of pounds into the country's three major banks.

The simultaneous announcements of similar national bailout packages gave a strong boost to the European financial markets, which rebounded sharply in the first two days of this week.

Till now the combined EU efforts stood at almost 2 trillion euros.

Expectations were high that this time EU leaders could endorse the joint action plan agreed by their eurozone members, expanding the coordination to the EU level.

"I am glad that there is now a consensus on the necessity and on the substance of a coherent effort," Barroso said. "I expect confirmation and strengthening of this coherent effort by the European Council," referring to the summit of EU leaders.

Luxembourg Prime Minister Jean-Claude Juncker, who also chairs the euro group, appeared equally optimistic.

"I bank on the principle that tomorrow the 27 (EU member states) will adopt the line as defined by the euro group on Sunday," he said. "It would make sense to have all 27 member states on board."

However, not everyone wants to be on board, especially the eastern European countries which have not been badly hit by the financial crisis. They simply see no need to join in and worry about being disadvantaged.

The Czech Republic's ambassador to the EU, Milena Vicenova, voiced concerns that deposit guarantee measures in wealthier neighboring EU countries could trigger a "flight of capital" out of her country.

"We have some concerns that there might be some spiral effects," she said.

In addition to the financial crisis, EU leaders also need to find a common line on the fight against climate change.

EU leaders agreed last year to reduce greenhouse gas emissions by 20 percent in 2020 from the 1990 level, increase use of renewable energy to 20 percent of the total and to cut energy consumption by 20 percent.

Barroso urged EU member states on Tuesday not to use the financial crisis as an excuse to water down the plan.

The Commission chief said he can understand that at the difficult financial moments, governments become more defensive, but climate change does not disappear because of the financial crisis.

He said the EU should not be flexible in the objectives but it would be possible to show flexibility on how to achieve them.


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