AP wrote:
Europe puts $2.3 trillion on line for banks
PARIS - European governments overcame their differences to put $2.3 trillion on the line Monday in guarantees and other emergency measures to save the banking system in their most unified response yet to the global financial crisis.
The pledges by six countries that use the euro and Britain helped soothe stock markets, along with a promise by top central banks to provide unlimited short term dollar credits.
The amount — pledged by Germany, Britain, France, the Netherlands, Spain, Portugal and Austria — dwarfs the $700 billion rescue package put together by U.S. President Bush's administration, although not all the European money will necessarily be spent.
It represented Europe's most unified response yet to the financial crisis, after weeks where European governments often acted at cross purposes and sniped at each other — a piecemeal approach that failed to stop steep and frightening slides on financial markets.
"The time of each one for itself is fortunately over," French President Nicolas Sarkozy said, following a Cabinet meeting that approved France's spending in the framework of the scheme.
"United Europe has pledged more than the United States," added the French leader, who has taken a lead in corralling European governments to act together.
The money pledged by European governments will not go into a collective pot. Instead, governments were deciding individually how much to commit to supporting their own banks under broad guidelines agreed at a summit on Sunday. The sums are considered a maximum, and might not all be spent if the financial crisis eases.
About 250 billion euros ($341 billion) of the European pledges was earmarked to be spent on recapitalizing banks by buying stakes.
The money pledges put a price tag on the package agreed to Sunday by the 15 countries that use the euro currency. They agreed to individually guarantee bank refinancing until the end of next year, rescue important failing banks through emergency cash injections and take other swift measures to encourage banks to lend to each other again.
Stocks markets rebounded Monday after the European decision and other weekend efforts to find solutions to the financial crisis, which has crushed major banks in both the U.S. and Europe and battered stock exchanges worldwide.
Germany's DAX rose 518.14 points, or 11.4 percent, to close at 5,062.45, while France's CAC-40 was up 355.01 points, or 11.2 percent, at 3,531.50. Britain's FTSE 100 was 324.84 points, or 8.3 percent, higher at 4,256.90, despite some hefty falls in the banks that have accepted government help.
Also helping markets was a joint move by the U.S. Federal Reserve, the European Central Bank and the Swiss National Bank to provide unlimited short-term credit in U.S. dollars to financial institutions. The Bank of Japan said it was considering similar measures.
Europe's biggest economy, Germany, put together a rescue package worth as much as 500 billion euros ($671 billion) to shore up the country's financial system. "We are taking drastic action, no question about it ... so that what we have experienced is not repeated," German Chancellor Angela Merkel told reporters.
Sarkozy said the French government would provide up to 360 billion euros ($491 billion) to help banks, most of that in guarantees for bank refinancing. The Netherlands put up 200 billion euros ($273 billion) to guarantee interbank loans.
Austria's government offered up to 85 billion euros ($116 billion). Spain said it would guarantee up to 100 billion euros ($135 billion) in a bank bond issuance this year. Portugal guaranteed 20 billion euros ($27 billion) euros — nearly 12 percent of annual GDP — to encourage Portuguese banks to lend to each other.
Italy did not earmark a specific amount but Finance Minister Giulio Tremonti told reporters the government would offer "as much as necessary."
The European moves are modeled on Britain's 50 billion-pound ($88 billion) plan to partly nationalize major banks. Prime Minister Gordon Brown has also promised to guarantee a further 250 billion pounds ($438 billion) worth of interbank loans to restore confidence in the financial sector.
The head of the International Monetary Fund welcomed the European decision despite the high price it is expected to impose on state budgets.
"We must recapitalize the banks ... otherwise everyone will suffer," Dominique Strauss-Kahn said on France's Europe-1 radio Monday. "And that costs money."
The euro zone leaders who met Sunday have yet to sell their packages to voters at home, and analysts warned that governments and legislators could still balk. The overall cost will be heavy, especially on countries already in or on the brink of recession.
Analysts from the banking sector generally saluted the euro zone measures. "After a haphazard start, Europe is finally getting its act together," Bank of America said in a research note. "The size and nature of the national plans suggest that they could finally make a difference."
The rest of the 27-member EU will have a chance to sign up to the euro-zone measures when they meet Wednesday.
Norway, outside both the euro zone and the EU, said it plans to offer new government bonds worth 350 billion kroner ($55.4 billion) to banks to help improve liquidity in the market.
In Sweden, Finance Minister Anders Borg said the government plans to put forward a draft law Wednesday to guarantee new bank debt until the end of 2009 and support banks with added share capital.
BusinessEurope — a group representing most European major companies — said EU governments' parallel moves to unfreeze bank lending would help "reinforce confidence and contribute to a continued flow of credit to companies and households."
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Associated Press writers Melissa Eddy in Berlin and Malin Rising in Stockholm contributed to this report.
This makes our 700 billion bailout look like chump change. We need to up our bailout to at least 2.5 trillion, we can't allow a bad credit bailout gap!
Edited, Oct 13th 2008 4:16pm by fhrugby