Brussels - Eurozone finance ministers Monday held difficult
talks in Brussels on how to rid their banks of toxic assets in a way
that is both affordable and fair.
Ministers from the 16 countries that share the euro debated a set
of proposals put forward by the European Union's executive, the
European Commission, and the European Central Bank (ECB).
Noting that financial markets remain 'vulnerable' and 'fragile,'
Luxembourg Prime Minister and Finance Minister Jean-Claude Juncker -
who chairs the monthly eurogroup meetings - said governments would
need to ensure that the measures adopted do not result in a bank
enjoying an unfair advantage over its European competitors.
Another obstacle to an agreement involves estimating exactly how
much taxpayer money would be needed to detox the banks, given the
difficulties involved in correctly pricing their dodgy assets.
'In some countries, for certain banks, and for specific reasons,
the right sort of treatment of toxic assets can help create
stability,' Juncker said.
At the same time, we are 'very aware of the fact that the way we
deal with this could have a very serious impact on (our) public
finances,' Juncker said.
Joaquin Almunia, the EU's economic and monetary affairs
commissioner, said that since the bloc would not enjoy a 'one-size-
fits-all' solution, the commission would have to ensure a level
playing field and the full respect of the EU's strict rules on what
kind of state aid is and is not allowed.
Almunia said assets would have to be priced in a transparent and
independent manner; there should be 'equal treatment', regardless of
the pricing technique that is used; and there should be an adequate
sharing of the burden between the various stakeholders involved.
Juncker said he hoped an agreement would be found on Tuesday, when
the talks were to be extended to finance ministers of all 27 EU
countries.
'For some banks, it is vital that we quickly find a way to deal
with toxic assets,' Juncker said.
While German Finance Minister Peer Steinbrueck is pushing for
'flexibility', Britain is already working on its own plan to insure
such assets using public money. The British proposal received a
lukewarm reception from fellow EU finance ministers when it was
presented in Brussels last month.
Monday's talks took place amid the growing realization that the
financial crisis is far from over. Highlighting the difficulties
facing the EU, the discussions featured a rare appearance from
European Commission President Jose Manuel Barroso, who flanked
regular attendees such as Almunia and ECB President Jean-Claude
Trichet.
Earlier in the day, French President Nicolas Sarkozy and German
Chancellor Angela Merkel asked the Czech presidency of the EU to call
an emergency summit on the crisis, to be held at the end of the
month.
The meeting, which is intended to prepare the groundwork for the
EU's regular March summit, will likely assess responses to the
financial crisis, as well as a proposed European-wide 200-billion-
euro (257-billion-dollar) economic stimulus package.
Disagreements within the 16-strong eurogroup also remain over the
creation of a euro bond market to finance the member states' rapidly
increasing budget deficits.
On February 18, the European Commission is expected to formalize
infringement procedures against six more EU countries whose deficits
exceeded the agreed limit of 3 per cent of gross domestic product in
2008.
Four of these - France, Spain, Greece and Ireland - share the
common European currency, while non-eurozone members Britain,
Romania, Hungary and Latvia also face excessive deficit procedures.
Dutch Finance Minister Wouter Bos, whose country has traditionally
defended fiscal prudence, said he was open to the idea of allowing
countries more time to reduce their deficits.
'Everybody agrees that the countries that go above the (3-per-
cent) ceiling should be granted a bit more time to get back to
sustainable government finances,' Bos said.
At the same time, 'we should avoid sending out the wrong
incentives, for example by giving countries that have huge deficits a
long time to return to sustainable finances,' Bos said.
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