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Financial crisis puts EU unity under test

Published: 21/12/2008 05:00

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The European Union (EU)’s much-vaunted unity now is under a real test as a contagious financial crisis unseen since the Great Depression has devastated the whole continent this year.

The logo of financial group Fortis NV is seen at the entrance the company’s headquarters in Brussels Dec. 14, 2008. (Xinhua/Reuters Photo)

Although efforts have been made to seek a coordinated EU response to the financial crisis, split are emerging between member states as they put their own national interests first.

EUROPEAN BAILOUT FUND REJECTED

Triggered by the collapse of the U.S. banking giant Lehman Brothers, the financial turmoil escalated into a full-fledged crisis in September.

As its financial system has been so interwoven with that of the United States, the EU soon fell prey to the crisis, with its financial institutions either exposed to huge losses in the U.S. financial market or suffering severe shortage of liquidity.

Britain’s mortgage lender Bradford & Bingley, Dutch-Belgian banking group Fortis and French-Belgian bank Dexia became the first European victims of the financial crisis, forcing EU governments to infuse billions of euros to keep them afloat.

The initial actions were taken by individual or several countries on an ad hoc basis. But cracks appeared in the EU’s unity when Ireland unilaterally guaranteed all deposits in its own banks to calm nervous savers, a move siphoning safety-seeking money away from other EU banks.

The fragmented approach created the impression of disorder and sent confused signals to financial markets, arousing concerns it may further undermine confidence.

While the U.S. government unveiled a 700-billion-U.S.-dollar package to bail out troubled banks, a similar plan had been floated for a joint EU fund.

But it was firmly rejected by Germany, which was reluctant to commit taxpayers’ money to an EU-managed fund.

VietNamNet/Xinhuanet

Update from: http://english.vietnamnet.vn//international/2008/12/819910/

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