EU finance ministers’ talks to focus on international crisis

A LOOMING international crisis triggered by over-risky lending by financial institutions will be central to discussions at the two-day meeting of EU finance ministers beginning today.

As the dollar decreases against the euro, markets remain turbulent and interest rates are adding to the pressure, the ministers will consider a report on using state aid to bail out banks in difficulties. However, longer-term measures are also likely to be discussed following meetings between the British, French, German and Italian finance ministers on a transatlantic agreement to help maintain global financial stability and avoid current problems caused by sub-prime mortgage lending.

Economic and Monetary Commissioner Joaquin Almunia, who is attending the meeting in the northern Portuguese town of Porto, said he hopes the meeting will help restore confidence in the market.

“I hope that this meeting will produce common conclusions that will be useful to improve the situation and, first of all, help regain confidence among market participants,” he said.

European Central Bank president Jean-Claude Trichet, who is also at the meeting, supports him.

He told the European Parliament’s Economic and Monetary Affairs Committee that investors were wary of investing even in high quality assets.

Bank of Ireland chief economist Dan McLaughlin said the tone of any resulting communique would be closely watched, given the divisions so far in responses across Europe to the crisis.

The meeting will also discuss the Commission’s updated economic forecasts that cut growth for this year by one percentage point to 2.5% for the euro area and 2.6% for the EU.

Mr Almunia has also warned that the drop in growth will be much larger next year.