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Calls For New EU Financial Order Increase As Total Meltdown
Becomes Likely
Economists, top EU officials call for more regulatory
power
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With major European banks now failing, calls have increased for
an entire restructuring of the financial system under a centralized
EU supervisory body.
With Belgian-Dutch group Fortis
becoming the first major European bank to buckle, British mortgage
lender Bradford & Bingley also being nationalized, as well
as several
other banks failing in Iceland, Denmark and Germany,
economists have warned that more are teetering on the brink and
only a radical centralization of power in Europe can stave off
financial ruin.
Earlier this month, German economist Daniel Gros
warned
in a report for the Centre for European Policy Studies (CEPS)
that several European banks have become so large that their governments
would no longer be able to save them. Should they fail no rescue
would be possible because the economy of the home nations are
smaller than the banks that reside within them.
Now, in an interview with Dutch newspaper Volkskrant,
Gros warns that European giants like Deutsche Bank, Barclays and
UBS (Switzerland) are dangerously close to folding.
The Deutsche Bank has 2, 000 billion euros of open
credit, one fifth of the german economy, while Barclays has 1,
640 billion euros of open credit, more than the entire UK economy.
(Article continues below)
Gros has proposed that European Parliament balance the books
of the affected banks and that a new system of financial supervision
is created with a 12 member body to overlook the European financial
market.
In October the European Commission will propose new rules governing
how much banks must keep in reserves, and set rules on how regulators
should act if a bank is in danger of collapse.
Top EU officials, including economy commissioner Joaquin Almunia,
have
stated that the EU should have greater powers to
regulate and intervene in the operations of financial institutions
across Europe.
"The latest events in financial markets have made it clear
that the current model of regulation and supervision needs to
be revamped," Almunia has said.
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