Europe stuns with €1.5 trillion bank rescue, as France plays role of saviour

[Le Male]

Europe stuns with €1.5 trillion bank rescue, as France plays role of saviour
Germany, France, Italy, Spain, Holland and Austria have joined forces to launch the greatest bank bail-out in history, offering over €1.5 trillion in guarantees and fresh capital in a "shock and awe" blitz to halt the credit panic.




By Ambrose Evans-Pritchard
Last Updated: 8:58PM BST 13 Oct 2008
Nicolas Sarkozy - Europe stuns with ?1.5bn bank rescue, as France plays role of saviour

http://www.telegraph.co.uk/telegraph/multimedia/archive/01008/nicolas_sarkozy_1008807c.jpg
French President Nicolas Sarkozy Photo: PHILIPPE WOJAZER

The move – unveiled simultaneously in the six states to maximise the show of unity – throws the full weight of the eurozone behind global efforts to stem the crisis.

The move gave a tremendous boost to bourses across Europe, lifting the Euro Stoxx index by 9.53pc in the biggest one-day rally ever.

The pan-European plan – totalling over $2 trillion, or £1.17 trillion – completes the third leg of a dramatic restructuring of finance across the Western world. Sovereign states have now absorbed the brunt of the credit risk in half the global economy.

"The greatest risk is inertia," said French president Nicolas Sarkozy, now basking in glory as the man who refused to give up after the first emergency summit of EU leaders ended in discord.

"The French state will not let a single bank fail. We have to unblock the interbank market because money has stopped circulating, but it is a reasonable bet that by offering this guarantee, it won't actually be needed," he said, unveiling a French package worth €320bn in guarantees for fresh interbank loans and a €40bn bank rescue fund.

Sarkozy has emerged as the statesman of the hour, shaping events as others dithered. He appears to have understood intuitively that credit paralysis would set off a dangerous downward spiral.

Germany's rescue package totals €500bn, far bigger in per capita terms than America's scheme. The bulk is to guarantee interbank lending, while €100bn is for a stabilisation fund to recapitalise banks and cover losses – with strict pay limits for executives.

"We have placed the first foundation stone of a new financial order," said chancellor Angela Merkel, underlining that nothing would ever be the same again in banking.

She also warned that the US government's "massive support" for the Detroit car industry would create a major headache for Germany's producers, who are already struggling. BMW said yesterday that it would idle plants in Leipzig, Regensburg and Munich as demand fell.

Italy's finance minister Giulio Tremonti said Rome would provide as much money "as necessary" to stabilise credit markets. Italy's plan includes the injection of up to €40bn in fresh capital into the banks on a "case by case" basis, through preference shares.

The Netherlands is offering a €200bn guarantee; Austria is putting up €100bn, as is Spain – as a "preventive measure". Debts issued before the end of next year will be guaranteed for five years under all the national plans.

Diplomats say the world owes a great deal to France's finance minister, Christine Lagarde. A former chair of the US law firm Baker McKenzie and a friend of US Treasury Secretary Hank Paulson, she has been a bridge between the EU and Washington, helping to end the transatlantic sniping that has damaged market confidence over the past year. The close co-operation is in stark contrast to the catastrophic rift in October 1931, when France set off a wave of US bank defaults by pulling its gold out of New York.

The Sarkozy accord was not enough to shield Société Générale yesterday, as reports circulated that it might be the first to tap into the French bank rescue fund, perhaps needing as much as €10bn. The share price collapsed 17pc at one point on fears of losses in its structured credit unit. Investors are concerned that it may suffer from exposure to Eastern Europe, where it has played a role in providing foreign currency mortgages. The shares ended down 2pc in Paris.

This week's dramatic action by the eurozone states has gone a long way to reassure investors that EMU can weather a severe crisis, even though it lacks an EU treasury or fully fledged lender-of-last resort. The EU Stability Pact rules on budget deficits have been shunted aside by invoking the "special circumstances" clause of the Maastricht Treaty, opening the way for fiscal stimulus. The Dutch-Belgian rescue of Fortis and the French-Belgian rescue of Dexia were not without friction, but at the end of the day the system was able to come up with creative solutions.

IMF chair Dominique Strauss-Kahn said the monetary union had faced its "ordeal by fire" this week. With French leadership, it survived.


http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3191459/Europe-stuns-with-1.5bn-bank-rescue-as-France-plays-role-of-saviour.html

Ah Sarkozy, i'm sure you're happy that this crisis help people to forget the problem with the lisbon treaty, help European unity and you fell like your the king of Europe.
Lol T4ROK is right, this guy really try to becaume the first European president.

[Republican]

Can't stand that socialist jerkoff.

[Amaretti]

I love that socialist jerkoff.

[Le Male]

Can't stand that socialist jerkoff.

If you talking about Sarkozy, he is not Socialist... he is member of the UMP, the equivalent of the american republican party.
But i agree that UMP is more close to the left than the republican.

[T4R0K]

RAAAAAGGGEEEEE !!!

RAH ! I hate when Sarko takes the mantle of the Savior ! Goddamnit ! At least I'll concede he indeed did pull out a good move !

I won't be like the little bitches of the socialist party that complain just for the hell of it.

Damn... Soon, he'll ask to be called "His Majesty"...

[hyakku]

I can't say i'm too familiar with sarkozy's history, but I don't see why you all are upset, this just stopped a huge fuckin crisis so I'm glad there are some thinking leaders out there. Together with American efforts we could turn this thing around into something that could really help us move to a more efficient interdependent liberal economic order.

[Le Male]

RAAAAAGGGEEEEE !!!

RAH ! I hate when Sarko takes the mantle of the Savior ! Goddamnit ! At least I'll concede he indeed did pull out a good move !

I won't be like the little bitches of the socialist party that complain just for the hell of it.

Damn... Soon, he'll ask to be called "His Majesty"...

When he was in the us as french president, they called him, His excellency

look this video to see that

http://www.youtube.com/watch?v=rlt2GE4EYo4

I can't say i'm too familiar with sarkozy's history, but I don't see why you all are upset, this just stopped a huge fuckin crisis so I'm glad there are some thinking leaders out there. Together with American efforts we could turn this thing around into something that could really help us move to a more efficient interdependent liberal economic order.

I'm not a Sarkozy hater, but this crisis help him to emerge as a great European leader, this crisis come when France took europe presidency for 6 month, it's so perfect for Sarkozy.

[T4R0K]

I can't say i'm too familiar with sarkozy's history, but I don't see why you all are upset, this just stopped a huge fuckin crisis so I'm glad there are some thinking leaders out there. Together with American efforts we could turn this thing around into something that could really help us move to a more efficient interdependent liberal economic order.

I'm just upset he goes from move after move, claiming anything that works as a success by his initiative.

He's like the successfull brat you can't help but despise and respect at the same time. Imagine someone you hate saving you. And still being a brat. It's unfuriating !!!

His excellency

Doesn't count. That's the title even ambassadors get. Wait until Emperor Nicolas the First arises.

[Outlandish]

cool, if only the banks would lend they wouldn't have this problem in the first place right ? :iria or there would be atleast buy some time :arg

[MuNaZ]

someone has to take control of the operations in Europe aka "savior" he's the one that should do it because it's his turn on power...
Like Socrates (Portugal's PM) tried to get Lisbon treaty done by all means during his time on power...

[Purgatory]

First Europe nationalizing banks, now this?

[Xion]

And stock market is happy. And when stock market is happy, shorters are sad. :(

[Republican]

There's no way to "stop" this kind of crisis, there are only ways to spread it out so it (maybe) doesn't hit as hard.

[Purgatory]

And stock market is happy. And when stock market is happy, shorters are sad. :(

And taxpayers get fucked in the ass again.

[Xion]

And taxpayers get fucked in the ass again.

I must say this ten times a day to you..................

"Please elaborate."

[Purgatory]

I must say this ten times a day to you..................

"Please elaborate."

Where the fuck do you think this exorbitant amount of money comes from?

[iLurk]

Vive la France!

[Xion]

Where the fuck do you think this exorbitant amount of money comes from?

It has nothing to do with my shorting quote though. :quite

Quoting is for replying. :awesome

And btw who wants schools when you can have equtiy? :gar

[narutosimpson]

this definitely ensures that the richest and most elite get to keep stranglehold on power and wealth.

[Le Male]

Where the fuck do you think this exorbitant amount of money comes from?

For France, Sarkozy said that the tacpayer will not pay it. They give money but there conditions for it.

[Xion]

this definitely ensures that the richest and most elite get to keep stranglehold on power and wealth.

You too need to elaborate.

Aren't they trying to unfreeze the credit markets which would help everybody?

Or are you just referring to their successes so far in trying that?

[narutosimpson]

You too need to elaborate.

Aren't they trying to unfreeze the credit markets which would help everybody?

Or are you just referring to their successes so far in trying that?

of course. without the bailouts the fatcats would have gone out of business , and been recognized as the trash blood sucking vampire failures that they are. Instead of new banks forming, with new capital and a just way of doing business, we'll let the old gaurd keep it's power.

@le male, what are those conditions?

[Dionysus]

Is the euro falling now?

[narutosimpson]

Is the euro falling now?

it's rising. All things being equal the euro is stronger than the dollar.

[The Pink Ninja]

Right now I'd say the Eurozone looks like the best place to invest.

[LouDAgreat]

The European rescue plan dwarfs the American rescue plan...my my... Europe is surging ahead of the U.S huh?

Doesn't the European guaranteeing of all debt mean that business will go to Europe for more protection instead of America? Just curious.

[xpeed]

It's the mark of the beginning....

[Purgatory]

The European rescue plan dwarfs the American rescue plan...my my... Europe is surging ahead of the U.S huh?

Doesn't the European guaranteeing of all debt mean that business will go to Europe for more protection instead of America? Just curious.

It's actually good, because we now know we didn't get as screwed over. :zaru

[Dionysus]

Right now I'd say the Eurozone looks like the best place to invest.
To be honest, I wouldn't be investing large sums in either the US or Europe. Generally speaking. (I'm sure there are high performing companies in each.) Both areas have essentially been in recession or suffering from stagflation for years. (The fundamentals of Europe do not look so rosy in comparison to the US.)

And perhaps the commodities boom has become bust once more, so the performing parts of Canada, and perhaps Russia, aren't as golden either.

[Sama'el]

Can't stand that socialist jerkoff.

:rofl

Wow, so you can't stand the pro-free market, Christian nationalist...

Maybe you have some repressed anger issues with Dubya.

[Shinobi Mugen]

What the hell? Fuck you Sarkozy, it was the dutch government who first called for a united european stance against the credit crisis. And it was the dutch government who kept on pushing for international measures even when the big shots France and Germany decided they didn't want to get involved with the problems of other nations and would only help themselves. So fuck you Sarkozy for once again taking credit for something you didn't do and don't deserve...

[1mmortal 1tachi]

America passes a 850 billion dollar bailout.

So...

Europe has to pass an even bigger bailout to show the whole world they can compete with the United States?

Its like the blind leading the blind!

lolcry

:yu

[narutosimpson]

America passes a 850 billion dollar bailout.

So...

Europe has to pass an even bigger bailout to show the whole world they can compete with the United States?

Its like the blind leading the blind!

lolcry

:yu

it's proof that the slave class and rich free class has been instituted world wide.

[Lezard Valeth]

The West is now the greatest force of Communism. :sag

[1mmortal 1tachi]

it's proof that the slave class and rich free class has been instituted world wide.


I agree with you there. In terms of there being people in foreign countries who have no choice but to do hazardous work such as shipbreaking or battery recycling, or face starvation, they are practically a slave class in practice if not by official status.

In terms of rich free class, I think the common thing is to cite the 20/80 rule. 20% of the population control 80% of the wealth. Some say its a proportion that has been in effect for a long time. That there has always been a 20% elite that has enjoyed greater freedom and privelege in life and also that the demographic has over time make contributions to politicians and influenced things in such a way as to gain favorable tax laws for the rich, etc, etc.

I'm not really sure if its something that has been instituted recently, or something that has been around for a very long time...

:awesome

[Sama'el]

I agree with you there. In terms of there being people in foreign countries who have no choice but to do hazardous work such as shipbreaking or battery recycling, or face starvation, they are practically a slave class in practice if not by official status.

In terms of rich free class, I think the common thing is to cite the 20/80 rule. 20% of the population control 80% of the wealth. Some say its a proportion that has been in effect for a long time. That there has always been a 20% elite that has enjoyed greater freedom and privelege in life and also that the demographic has over time make contributions to politicians and influenced things in such a way as to gain favorable tax laws for the rich, etc, etc.

I'm not really sure if its something that has been instituted recently, or something that has been around for a very long time...

:awesome

Actually, it's more like a 5/95 rule. Five percent of the American population own and control 95 percent of the wealth in the United States. Those same five percent have a disproportionate influence in politics and the media.

It's something that's existed for a long, long time. It's a travesty that must be undone.

[niyesuH]

The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity. -Abraham Lincoln

[drache]

Can't stand that socialist jerkoff.

never mind that he just helped at least cushion what could have been a gobal depression.

What effect it will ultimately have is unknown right now but it should at least help.

[narutosimpson]

never mind that he just helped at least cushion what could have been a gobal depression.

What effect it will ultimately have is unknown right now but it should at least help.

ur just guessing, and ur guess is no better than anybodies.

[drache]

ur just guessing, and ur guess is no better than anybodies.

Well it is/was pretty much a given that things were going bad fast globally.

Would it/will it become a gobal depression? Perhaps.

As to what will happen as I said I'm not sure but I do think this will help and the reaction agrees with that assement.

[narutosimpson]

Well it is/was pretty much a given that things were going bad fast globally.

Would it/will it become a gobal depression? Perhaps.

As to what will happen as I said I'm not sure but I do think this will help and the reaction agrees with that assement.

what reaction are you talking about? i equate your assessment to the logic that justified the iraq war. We don't know if it helped, but we sure as hell are gonna say it made things better,believe that. it's alot of uncertainty to be throwing so much money at.

On the subject of bailouts,i have already voted against my politician up for re-election that approved that first bailout. I hope those of you who believe in govt by the people for the people will do the same.

[drache]

what reaction are you talking about? i equate your assessment to the logic that justified the iraq war. We don't know if it helped, but we sure as hell are gonna say it made things better,believe that. it's alot of uncertainty to be throwing so much money at.

On the subject of bailouts,i have already voted against my politician up for re-election that approved that first bailout. I hope those of you who believe in govt by the people for the people will do the same.

Look let's be honest here, you believe that any bailout/rescue is wrong.

I believe that doing nothing is sucidiaully stupid.

Those opnions color our reactions, so of course you're going to think my logic is bad.

However the markets stablizing would suggest your wrong.

[T4R0K]

What the hell? Fuck you Sarkozy, it was the dutch government who first called for a united european stance against the credit crisis. And it was the dutch government who kept on pushing for international measures even when the big shots France and Germany decided they didn't want to get involved with the problems of other nations and would only help themselves. So fuck you Sarkozy for once again taking credit for something you didn't do and don't deserve...

That's Sarkoman for yah ! I remember hearing a lot about the move of the Dutch and Belgian governments at the beginning of the big fall a few weeks ago, and Shinobi Mugen is right : they started the move, not just the idea.

But you know, Mugen, Sarko is an asshole just like that... He always steals spotlight from people...

[hyakku]

Look let's be honest here, you believe that any bailout/rescue is wrong.

I believe that doing nothing is sucidiaully stupid.

Those opnions color our reactions, so of course you're going to think my logic is bad.

However the markets stablizing would suggest your wrong.

Wow its so funny, because I remember when there were people like us suggesting that a bailout could work given the right circumstances (stimulus plan, incentives, etc.) and there were people shouting how it wouldn't work. It's still not perfect but we can definitely fix this, I believe the last thing needed right now is a Euro type of plan on a smaller scale since we already have this bailout, but also some guarantees out there to make people feel safe for a bit. Although I really prefer Obama's new 90 day moratorium idea, but i'm not sure that would have a positive effect. In theory it should, but with delaying people paying mortages greedy banks will probably just stop loaning until they recoup their losses.

[dummy plug]

well its nice to see them all united like that :amuse

[1mmortal 1tachi]

Actually, it's more like a 5/95 rule. Five percent of the American population own and control 95 percent of the wealth in the United States. Those same five percent have a disproportionate influence in politics and the media.

I wasn't talking about the US.

It's something that's existed for a long, long time. It's a travesty that must be undone.

What's wrong with it? :awesome

--Not seeing a problem here.

The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity. -Abraham Lincoln

So say'eth the man who knows less about economics than George W. Bush.

:zaru

[niyesuH]

he knows more then you do

[drache]

he knows more then you do

I don't think Bush even knows how to brush his teeth, so I highly doubt he knows anything abotu economics.

[Zaru]

Great success. After the announcement, the stock markets started rising again.. and dropped again today :facepal

[hyakku]

It will be up and down for a good while but expect to see a steady rise soon.

I think one of the best things to do would be to (and this is just a rough idea) offer incentives to banks/lenders that offer to readjust mortgage rates/ reduce interest rates on consumers that are more forthcoming with their payments. THEN introduce a stimulus plan, encouraging more people to spend in the market to free up credit and aid the banks. It's not exactly a perfect plan, but done in the right context I think its a perfect way of using structured options to encourage the population to spend on getting the economy moving while also helping themselves in the long run and taking a bit of burden off of our backs while restoring confidence in the financial system.

[Dionysus]

And I just read an article saying that it was Gordon Brown who saved the global financial markets and banks, at least for now. It says the US and the rest of the EU followed his lead.

Everyone's taking credit. :awesome

[1mmortal 1tachi]

he knows more then you do

Oh, burn.

:facepalm

[Xion]

Good Europe you look kind of cool. :argh

[El Torero]

ZP, you need to learn a lot of things of your french partner :facepalm

[niyesuH]

Oh, burn.

:facepalm

dont be too harsh on yourself

[TatsuBon]

and where does the money come from? :zaru

[1mmortal 1tachi]

and where does the money come from? :zaru


The money tree.

:zaru

[The Space Cowboy]

The only reason you cannot do nothing is that the over-riding goal of any elected official is to be re-elected. The problem with throwing money at banks is that the market will price your actions into things.

This whole thing sounds like a massive bluff. Someone is playing Chicken with the Bear Market.

The World Leaders are sweating bullets and praying that the Markets won't call their bluff. The notional value of all the derivatives contracts out there exceeds the GDP of the entire planet.

Collapse of the European economy in 3...2...

[Zabuzalives]

Most of the aid is either lending money which will be paid back. Or pumping money in a bank but in exchange for stocks of that bank. somewhat nationalizing it. Which you can sell at a time the market has stabilized itself.

This new amount is simply them saying they wont allow any banks to fall. So that banks wont be afraid anymore to lend money between themselves. If trust is gained, and moneyflow between banks will start again...as well as stopping the public panicking and withdrawing their savings.
Well it is mainly a signal. So as to regain trust. If it works which it somewhat seems to do

There will be no need to pay this money.


Even if some of it will be needed, its probably still better then doing NOTHING and watching the entire financial system collapse. Which is gonna cost us a lot more. Who of us doesnt have savings on a bank? Let alone the tremendous depression that will jumpstart.


And how is this a victory for the money grubbing bankers?? If their bank fails they basically become state property.
This whole crisis has sparked the need for a new financial system, with a much tighter watch against banks taking to much risk.
Talks about this are already being made.

For its not like the government and public LIKE how selfish short term interest of a select few caused a worldwide crisis. Hence the new system will have more checks and balances.



But what causes me more concern is how our whole economy seems to revolve on us consuming more and more. Especially in America where despite huge depts, consuming seems to be an obsession. This cant go on forever.

[zabuza666]

nothing gets rid of the depression like a good old war :zaru

[narutosimpson]

Most of the aid is either lending money which will be paid back. Or pumping money in a bank but in exchange for stocks of that bank. somewhat nationalizing it. Which you can sell at a time the market has stabilized itself.

This new amount is simply them saying they wont allow any banks to fall. So that banks wont be afraid anymore to lend money between themselves. If trust is gained, and moneyflow between banks will start again...as well as stopping the public panicking and withdrawing their savings.
Well it is mainly a signal. So as to regain trust. If it works which it somewhat seems to do

There will be no need to pay this money.


Even if some of it will be needed, its probably still better then doing NOTHING and watching the entire financial system collapse. Which is gonna cost us a lot more. Who of us doesnt have savings on a bank? Let alone the tremendous depression that will jumpstart.


And how is this a victory for the money grubbing bankers?? If their bank fails they basically become state property.
This whole crisis has sparked the need for a new financial system, with a much tighter watch against banks taking to much risk.
Talks about this are already being made.

For its not like the government and public LIKE how selfish short term interest of a select few caused a worldwide crisis. Hence the new system will have more checks and balances.



But what causes me more concern is how our whole economy seems to revolve on us consuming more and more. Especially in America where despite huge depts, consuming seems to be an obsession. This cant go on forever.

you are supporting bailouts yet the bailouts have done nothing to this point, and banks don't wanna lend money cause lending money now is the dumbest idea in the world.

Americans are up to the hilt in debt, and being that our gnp is consumption based, it spells a terrible future for our economy. This is gonna get uglier and stay that way for a while.