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European countries split over bailout plan

business Updated: Oct 06, 2008 22:16 IST

AFP
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European finance ministers were divided on Monday on whether Europe needed a US-style bailout fund to prop up the ailing financial system, as Italy sought to revive the idea.

"I don't think there is going to be anything near consensus about a European fund," said Dutch Finance Minister Wouter Bos as he arrived for talks with eurozone counterparts.

"I hope there is going to be a consensus about a common approach on principles that should be applied whenever we want to intervene or whenever we want to help banks in problems," he added.

The Netherlands was last week the first to raise the possibility of a plan mimicking the 700-billion-dollar rescue package approved by the US Congress last week.

However, the idea, which has the backing of the European Union's French presidency, was quickly torpedoed by Germany and Britain, which preferred solutions at the national level.

Germany, Europe's biggest economic power, in particular was eager to avoid getting stuck footing the bill for the bailout of other countries' banks.

"We are of the opinion that a European bailout plan would not be helpful," said German deputy finance minister Joerg Asmussen.

Spanish Finance Minister Pedro Solbes also said that the idea of a European fund "would be quite difficult" to implement in Europe "given the structure of the European Union," which does not have a big enough federal budget.

Italy sought on Sunday to relaunch the idea, with Prime Minister Silvio Berlusconi saying that his Economy Minister Giulio Tremonti would make the proposal for the fund, worth about three percent of gross domestic product, at the meeting on Monday.