Europe Responds in Fragments

October 13, 2008

Europe has for months stood unified in its public position that it will be able to withstand the developing financial maelstrom because its banks are healthier than U.S. banks. Over the past few days, however, that position has changed. Belgian, French and Luxembourgian authorities have stepped in to shore up Fortis Bank. Irish, German and Danish governments have announced guarantees to backstop private bank deposits. And the Swedish government has increased the level of its deposit guarantees. Separately, the U.K. unveiled plans for a £50 billion ($87.18 billion) bailout. Broadly speaking, the U.K. bailout entails £50 billion of capital (£25 billion to be invested shortly with a further £25 billion if required) will be made available to U.K. banks and building societies in the form of preference shares, PIBS, or equity. The government will guarantee all short- and medium-term debt issuance, and will make available a £200 billion Special Liquidity Scheme.

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