European Nations Exchange Blame Over Crisis Response

French President Nicolas Sarkozy prior to a meeting with the country's top bankers and insurers.

With European stock markets in a deeper freefall than Wall Street's and growing doubts about the solvency of major banks, the only measures the EU finance ministers from 27 member states could agree on at a meeting in Luxembourg Monday were to raise minimum guarantees for bank deposits to $68,000 (50,000 euros) from $27,000 (20,000 euros) and to issue a set of common guidelines to be followed in case of intervention to save a financial institution.

Perhaps reflecting their own inability to come up with a comprehensive rescue package, European leaders have turned their ire on U.S. Secretary of the Treasury Henry Paulson's decision not to rescue Lehman Brothers. "When you allow one domino to fall, the others risk collapsing," French Finance Minister Christine Lagarde said in an interview on the RTL Radio Network.

‘We will not tolerate a European Lehman Brothers," the French minister told her colleagues at yesterday's Luxembourg meeting.

For the moment, therefore, Europeans will continue to deal with the crisis case by case. The problem is that a new crisis appears to arise every day, with no one knowing when or where the troubles will end.

On Sunday, French banking giant BNP-Paribas bought Fortis, Belgium's biggest bank, for $20.5 billion (15 billion euros) to keep it from collapsing. Yesterday, Spain announced that it was setting aside $41 billion in bank funds to help troubled lenders. Then today, the British government said it would inject some $87 billion to prevent the collapse of its banking system, in the process partially nationalizing the sector through the acquisition of preference shares.

Experts believe that the crisis may eventually lead to the creation of Europe-wide banks. This is already happening to an extent, with BNP-Paribas, for example, now Belgium's largest bank after the acquisition of Fortis. Under EU regulations, governments will not be able to oppose such moves, and pan-European banks could pave the way for more centralized control of the banking system.

"What is very sad is that the Europeans did not draw on the advantages of the euro in order to create a financial policy," says Moreau Defarges. "Europe always advances by using only one leg at a time."