Juncker sees no need for rescue fund

Berlin/Dublin: The chairman of euro zone finance ministers sided with Germany yesterday in rejecting any need for a European rescue fund for distressed banks, but the Dutch government endorsed a similar idea.

France confirmed that President Nicolas Sarkozy would host a summit on the global financial crisis with leaders of Germany, Britain and Italy, European Commission President Jose Manuel Barroso, European Central Bank President Jean-Claude Trichet and Eurogroup chairman Jean-Claude Juncker in Paris tomorrow.

The official announcement put an end to uncertainty about a meeting Paris has pushed for, due to disagreements among the main European Union governments on the right response to the deepening credit crunch.

Irish legislation

Ireland's parliament defied opposition from London and misgivings in Brussels by passing legislation to guarantee all deposits in Irish-only banks that has already triggered an inflow of cash from British banks.

Eurogroup chairman Jean-Claude Juncker said he was "very relieved" the US Senate had adopted a $700 billion plan to take so-called toxic assets off banks' balance sheets, but insisted Europe did not need a similar programme.

Several European government sources said France had floated the idea of a 300 billion euro (Dh1.55 trillion) EU bank rescue fund ahead of tomorrow's meeting, although Paris denied the existence of such a proposal.

"I don't see the need for us to set up a similar programme in Europe," Juncker, who is also Luxembourg's prime minister, told Deutschland Radio Kultur.

The financial crisis went much deeper in the United States than in Europe, he said, but he hoped for a European response to the crisis that was a "bit more systematic".

Sarkozy publicly said no EU-wide bailout was in the works and denied a 300 billion euro fund was under consideration. "I deny both the amount and the principle [of such a plan]," he told reporters at the French presidential palace.

Response

British Prime Minister Gordon Brown's spokesman said he did not expect discussion of an EU-wide bank fund at the meeting. "The purpose of the meeting will be to discuss how each of the four major economies in Europe are responding to the global financial crisis," he said.

French Finance Minister Christine Lagarde has said a "European safety net" could be needed to prevent a bank in a smaller EU country from going bankrupt.

But German Chancellor Angela Merkel said Germany "cannot and will not issue a blank cheque for all banks".

Germany's Finance Ministry said the German government "completely disagreed" with the idea.

The Netherlands backed the reported French idea.