EU leaders to discuss plan amid criticism of bailout

IRELAND’S move to guarantee all bank deposits will be one of the issues discussed at today’s talks in Paris among the leaders of the EU’s major economies.

The €400 billion guarantee has drawn criticism from a number of countries and will give rise to a debate on the extent governments should guarantee bank deposits and loans.

Commission President Jose Manuel Barroso has emphasised the need to have a coordinated EU response, and was critical of Ireland’s failure to keep the EU informed of its actions.

But the idea of a US-style pan-European fund to bail- out institutions in trouble appears to have bitten the dust as France and Germany, in particular, say they are not in favour.

The Dutch had proposed a €300bn fund but they will not be at this afternoon’s meeting in the Elysse, which will be attended by the premiers of Britain, Germany, France and Italy as members of the G8 and ECB President Jean-Claude Trichet and eurozone chair Jean-Claude Juncker.

While there are several ideas floating around — including greater cooperation among the EU’s national regulators, changing the rules to allow banks to adjust the value of their assets and raising the minimum deposit guarantee from €20,000 — no single idea has the support of every EU country.

A German spokesman said: “The most important thing is to give some signal of confidence and calm to people and to the markets.”

Nicolas Veron, an economist with Brussels- based think tank Bruegel, said Ireland’s move has led to very active discussion of a pan-European deposit insurance. He said it would be a good idea if EU countries agreed to share budgetary resources to bail out the banking system, but he did not expect this to happen.

The brain-storming session should feed back into the EU finance ministers meeting on Tuesday and into the EU leaders summit in two weeks’ time in Brussels.

By last evening the Government had still not communicated the details of its guarantee plan to the European Commission though competition spokesperson Jonathan Todd said there are ongoing contacts between them.