2008-10-05

PARIS — After days of squabbling, the leaders of Europe’s largest economies vowed Saturday to work together to stop a growing financial panic, but they failed to offer a systemwide answer to a credit crisis that has forced them to bail out several banks in just the past week.

Though they did not agree on a broad bailout along the lines of the $700 billion package that President Bush signed into law on Friday, the leaders of France, Germany, Britain and Italy pledged to prevent a bankruptcy on this side of the Atlantic like the one that brought down the Lehman Brothers investment bank in New York.

Sharply criticizing what they said were the American roots of what has become a global credit crisis, Europe’s leaders insisted it was time for the European Union to act decisively.

“We are fully aware of the responsibility that weighs on our shoulders,” said President Nicolas Sarkozy of France, who hosted the gathering at the sumptuous Élysée Palace here.

The crisis has become the biggest financial challenge for European policymakers since the introduction of the euro as a Continent-wide currency in 1999.

Despite sharing the euro, European countries lack a common budget and uniform regulations for crossborder banks and brokerages, hampering their ability to enact a large bailout program like the one passed in Washington.

The unusual Saturday afternoon meeting was hastily convened by Mr. Sarkozy, whose country holds the rotating presidency of the European Union.

Afterward, flanked by Chancellor Angela Merkel of Germany and Prime Minister Gordon Brown of Britain, Mr. Sarkozy said, “What is of the essence is that Europe should exist and respond with one voice.”

As in the recent conflict between Georgia and Russia, Mr. Sarkozy seemed to revel in the role of being Europe’s chief spokesman in this crisis, occasionally whispering to Mr. Brown and sharing a joke with Mrs. Merkel.

Mr. Sarkozy praised the passage of what he called “the Paulson plan” in Washington — a reference to Treasury Secretary Henry M. Paulson Jr. of the United States — calling it a stabilizing factor for the global economy.

Although Mr. Sarkozy said it was time “literally to rebuild the foundations of the financial systems,” the steps announced were more modest.

Leaders said they would try to rewrite European accounting rules by the end of the month to limit the losses banks have to write off, an effort to match changes in “mark-to-market” accounting rules in the United States while keeping Europe’s financial sector competitive.

They stopped short of calling for an overarching banking regulator for Europe but proposed creating a panel of European regulators to jointly oversee large financial institutions with operations in different countries.

More significant for the long term, the leaders declared that the European Union’s strict rules on competition and fiscal responsibility should be interpreted with greater “flexibility” if more banks require government financial help to survive.

They also vowed to lobby the European Investment Bank to make an extra $21.2 billion available immediately to small and midsize businesses squeezed for credit, an initiative spearheaded by Mr. Brown of Britain.

With two British banks already nationalized and the British economy teetering on the edge of a recession, Mr. Brown adopted a forceful tone at a news conference after the meeting.

“Where action has to be taken, we will continue to do whatever is necessary to preserve the stability of the financial system,” he said. “We agreed that we must do more to coordinate our response in times of crisis and the interest of stability.”

But plenty of differences remain. For example, the leaders did not propose a Europe-wide bailout fund akin to the American rescue package, nor did they agree on a common standard for bank deposit insurance across the European Union.

A week ago the Irish government said it would fully guarantee bank deposits in Irish banks, reassuring consumers there but angering leaders of neighboring nations that offer much less sweeping protections for savers.

The move prompted the British government to raise its deposit insurance to 50,000 pounds, or $88,500, from 35,000 pounds, or about $62,000, because of concerns that British savers might abandon their banks for the comparative safety of Irish banks.

At the meeting on Saturday, the leaders seemed to take a veiled swipe at the Irish move, declaring in a joint statement, “We will ensure that potential cross-border effects of national decisions are taken into consideration.”

Ireland was not the only country singled out for criticism.

Despite praise for the American bailout plan by Mr. Sarkozy and Silvio Berlusconi, Italy’s prime minister, Mr. Brown said pointedly that the crisis “has come from America.”

Mr. Berlusconi claimed that “Europe is not facing and never faced the risks in the American system.” Europeans, he said, “set aside money in savings.”

One leader after another blamed what they called “speculative capitalism” for a financial crisis that they said was the worst since World War II.

“We want a capitalism of entrepreneurs,” Mr. Sarkozy said. “We don’t want speculators.”

The meeting took place after a frenzied week of state intervention to rescue faltering banks in Germany, Belgium, the Netherlands and Britain. Several European economies are sliding into recession, with growth stalled in France, unemployment surpassing 11 percent in Spain and Mr. Brown’s fiscal stewardship criticized in Britain.

In addition to the political leaders, the meeting was attended by Jean-Claude Trichet, the president of the European Central Bank, who oversees monetary policy within the euro zone.

Calling the Central Bank “an anchor of stability,” Mr. Trichet said of the 320 million Europeans in the euro zone, “They can count on us.”

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