EU Summit Postponed Over Bank Recapitalisation Discord
Herman Van Rompuy, European Council President, decided to postpone the EU summit, originally planned for next week, until 23 October. It appears extra time is needed for Germany and France to overcome discord over bank recapitalisation plans, despite the agreement touted last Sunday.
“I have decided to convene the European Council and the Eurozone Summit on Sunday, 23 Oct. 2011,” Council President Herman Van Rompuy twitted at 15 hours Brussels time today (10 October).
The announcement confirmed persistent rumours which had started from an inconclusive bilateral meeting in Berlin on Sunday evening (9 October).
A source quoted by Reuters said the delay was in part due to the report of EU and IMF inspectors about Greece’s budgetary efforts which is still outstanding.
“Leaders want to be able to act on the results of the Troika report which would not have been ready in time for the original date,” the source said, adding that the postponement was more at the request of Paris than Berlin.
But apparently the bigger reason for leaders to seek more time are the different views in Paris and Berlin on how to proceed with bank recapitalisation, following the implosion of Belgian lender Dexia.
Dexia’s shares plummeted 33% today, despite the efforts by the French and Belgian authorities to partially re-nationalise the troubled bank, the first to fall victim to the two-year-old euro zone debt crisis.
French politicians are reportedly worried that even an orderly Greek debt default could floor French banks and were pushing for action to bolster capital levels.
Paris wants to tap the euro zone’s €440 billion bailout fund – the European Financial Stability Facility (EFSF) – to shore up its banks, worried that pouring its own money into them could compromise its coveted triple-A credit rating.
In contrast, Berlin insists that banks in need of recapitalisation should find funds on the open market, and in case of difficulty turn to their governments.