EURO-ZONE COUNTRIES last night agreed a common set of rules to bail out their banking sectors. It includes plans to kickstart stalled markets and partly to nationalise distressed financial institutions.
They pledged to guarantee loans between banks until the end of 2009, and said they would put money into them by buying preference shares.
Taoiseach Brian Cowen described the decisions taken last night as "a toolbox for future instruments that various member states will use to deal with the present situation".
Most of the five-page declaration issued at the end of the three-hour summit at the Élysée Palace focused on increasing liquidity and recapitalising banks. But Mr Cowen implied he had no immediate plans to do so. "Obviously I've never ruled anything out, and I've never ruled anything in," he said.
Whether the State will become a shareholder in banks was "a question that is not possible to be speculated on, nor would it be helpful," he explained.
Ireland "took decisive action on September 29th and there's a recognition and acceptance that Ireland has done that," the Taoiseach said.
José Manuel Barroso, the president of the EU Commission, rang Mr Cowen after his return from Paris late last night to relay that the commisison had approved Ireland's guarantee plan.
"Despite the very great challenges we face, which will be pointed out in the Budget on Tuesday, we still have a relatively good economy compared to others," Mr Cowen said.
The Government argued unsuccessfully for the verb "can" rather than "will" in this phrase in the final declaration: "each Member State will make available to financial institutions Tier 1 capital . . ."
"These are in some respects semantic arguments," the Taoiseach said. He emphasised the a la carte nature of the plan. "There is nothing mandatory ... You can use them if they are required given a particular set of circumstances. We obviously need to retain discretion at State level within an overall framework, and that's what we've done."
In addition to agreeing measures to ensure liquidity conditions, fund banks and recapitalise distressed banks, the European leaders decided to ease accounting rules and improve co-operation between states.
The meeting was called by President Sarkozy, the acting president of the European Council, and was attended by the leaders of all 15 euro-zone countries. Although Britain is not a member, its prime minister Gordon Brown took part. His initiative to recapitalise British banks - as opposed to simply buying up bad debt - in exchange for partial nationalisation was the inspiration for yesterday's plan, effectively a Franco-German version of the British blueprint, finessed at a summit between German chancellor Angela Merkel and Mr Sarkozy on Saturday.
The plan was couched in detailed, technical language. "I've never seen an EU declaration so technically complex," said a diplomat. "At least it means there's some substance."
No overall costing was given for the plan. France, Germany and Italy will announce their specific plans "simultaneously" today, Mr Sarkozy said. Britain will also announce its plan today. "This evening was the time for Europe to show its unity," Mr Sarkozy said. "Tomorrow will be the time for each nation to draw its conclusions from what Europe has decided." He called it a "common plan" allowing national flexibility.
The European Council meeting on Wednesday will debate "a mechanism to improve crisis management between European countries," the declaration said. The goal of the plan is to unblock the inter-bank market as quickly as possible. Mr Sarkozy said effects would be felt "before the end of the week".
The European plan follows efforts at the IMF's annual meeting in Washington to co-ordinate the global response to the turmoil in international markets. Deutsche Bank chief Josef Ackermann, who is chairman of the Institute of International Finance, a group that represents 400 of the world's largest banks, said on the fringes of the IMF meeting that the next 24 hours would be a "critical moment" for the financial crisis.