News & Current Affairs

October 15, 2008

Bank crisis to dominate EU talks

Bank crisis to dominate EU talks

the curve of the German stock index DAX at the stock market in Frankfurt

There are fears of a recession in Germany, the EU’s biggest economy

EU leaders are meeting in Brussels to discuss a multi-billion-euro rescue scheme for Europe’s ailing banks.

The 27-member bloc is expected to rally behind plans agreed on Sunday by officials from the 15-nation eurozone.

Stocks markets appear to have stabilised since then, but are expected to remain nervous because of worries over a recession in the US and Germany.

Green groups are fearful that the economic crisis will derail EU plans to tackle climate change.

‘Common sense’

European leaders at the meeting are expected to try to keep the emphasis on joint action to unfreeze bank lending and restore confidence in the markets.

“I am sure… there will be a common position,” said European Commission chief Jose Manuel Barroso.

“I have boundless faith in the sense of responsibility and common sense of our heads of government and states.”

However, Germany, the continent’s biggest economy, is on the verge of recession, a report said on Tuesday.

Leaders will meet under the chair of the French, who hold the current presidency, and have a packed agenda that includes:

Bank bail-outs

Europe’s largest economies have announced hundreds of billions of euros in state support for their struggling banks. France, Germany, the Netherlands, Spain and Austria are planning to guarantee bank lending, provide short-term liquidity and partly nationalise some banks, in schemes modelled on the UK’s £500bn (640bn-euro) bail-out package.

Other members of the 15-nation eurozone are expected to brief their colleagues on similar rescue plans. French President Nicolas Sarkozy, chairing proceedings, has urged European governments to act together in the crisis, to avoid damaging splits.

In a departure from the norm, European Central Bank President Jean-Claude Trichet will address the summit on Wednesday.

The commission now has the task of scrutinising each country’s plan to ensure they do not disadvantage other EU member states or violate EU competition laws.

Immigration

Leaders are expected to sign an immigration pact, committing their countries to common principles for handling immigrants, and trying to achieve a better match between immigrants’ skills and jobs in the EU labour market, which is facing certain skills shortages and an ageing workforce.

An EU “return directive” sets out common rules for processing illegal immigrants, while the EU also has plans a “Blue Card” scheme to attract more high-skilled immigrants.

Energy

France is anxious to get agreement on a package of environmental measures before its EU presidency ends in December. President Sarkozy has stressed that, despite the economic strains caused by the credit crunch, the EU must become “a low-carbon economy”.

Politicians in Germany, Italy and Poland have argued that existing targets for reducing greenhouse gas emissions would impose extra burdens on electricity generators and carmakers, as an economic recession looms. In the case of the UK, similar resistance has arisen over including aviation in the CO2 targets.

Lisbon treaty

EU leaders are waiting for the Irish government to come up with a “roadmap” – a way forward – after Irish voters rejected the Lisbon Treaty in June. The treaty, aimed at streamlining EU institutions to cope with enlargement, has to be ratified by all 27 member states to take effect. Most have now ratified it, but no big breakthrough is expected at this summit.

Relations with Russia

The EU has postponed talks on a new EU-Russia partnership treaty, amid continuing concern about Russia’s military presence in Georgia. EU monitors verified a Russian withdrawal from buffer zones around the breakaway regions of South Ossetia and Abkhazia, but the situation remains very tense. There are divisions in the EU about when to resume partnership talks.

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