Maybe the monetary system is failing because it is no longer relevant?
France heaped pressure on Gordon Brown last night by floating an ambitious plan for a ¤300 billion (£237 billion) bailout fund to rescue crippled banks across Europe.
As the world held its breath on the fate of America’s $700 billion bank bailout plan, President Sarkozy was seeking the backing of European leaders for his own lifeboat.
Mr Brown also faced demands for action from British banks, furious that the Irish Republic’s unilateral guarantee of all bank savings on Tuesday was robbing them of precious deposits. The British Bankers’ Association, which represents high street banks, said that the move was anti-competitive and that it was raising the issue with Dublin. Some banks would like to see the UK respond with its own explicit guarantee.
The Prime Minister has begun to set up an emergency committee to take charge of Britain’s response to the crisis. The body will be similar to Cobra, which is composed of ministers and government officials and meets regularly during crises such as last summer’s floods. Its secretariat will be run from the Cabinet Office.
Mr Sarkozy, whose country holds the European presidency, is seeking Mr Brown’s support before an emergency summit, scheduled tentatively for Saturday, with Silvio Berlusconi, the Italian Prime Minister, and Angela Merkel, the German Chancellor. His proposal was greeted with scepticism in Britain and outright hostility in Germany. It appears to involve the creation of a Europe-wide emergency fund that would be used to prop up banks when national governments are unable to intervene.
Ms Merkel said that Germany could not and would not issue a blank cheque for all banks, “regardless of whether they behave in a responsible manner or not”.
Amid the confusion and bickering between governments, France denied at first that it had put forward a proposal for a fund at all and then, after admitting that it had done so, denied that it would cost ¤300 billion. Paris said that the figure had come from the Dutch Government. Officials in The Hague said that they had no idea what the French were talking about.
Mr Brown is expected to announce his new crisis committee today or tomorrow at the same time as his reshuffle to replace Ruth Kelly, the Transport Secretary, who has asked to step down. Ed Miliband, one of Mr Brown’s key lieutenants, could be promoted. There is still a question mark hanging over Alistair Darling’s future as Chancellor.
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