Merkel: Those who caused the crisis must help pay for it (1st Lead)

Oct 4, 2008, 15:39 GMT

French President Nicolas Sarkozy (C) welcomes British Prime Minister Gordon Brown (R) to Elysee Palace in Paris, France, 04 October 2008. EPA/DAVID EBENER

Paris - Those responsible for provoking the financal crisis must be held accountable for it, German Chancellor Angela Merkel said on Saturday in Paris.

'We believe that politicians must naturally assume their responsibility in such a difficult situation. But we also believe that those who caused this damage must also make their contribution,' Merkel said at the start of an EU mini-summit on the financial crisis.

The mini-summit was called by French President Nicolas Sarkozy, as current EU president, and will be attended by German Chancellor Angela Merkel, British Prime Minister Gordon Brown and Italian Prime Minister Silvio Berlusconi, the leaders of the four EU countries who also belong to the G8 group of industrial nations.

European Commission head Jose Manuel Barroso, European Central Bank president Jean-Claude Trichet and the head of the Eurogroup, Luxembourg Prime Minister Jean-Claude Juncker, are also participating at the scheduled four-hour meeting.

The aim of the Paris meeting, Merkel said, was to 'talk about better future prevention (of such crises). I think that there is a high degree of agreement in our countries to guarantee that such crises do not occur again.'

For his part, Sarkozy said, 'This is a global problem that requires a global response ... Europe must show the will to propose a solution that will reassure everyone, taxpayers and depositors alike.'

Brown arrived in Paris after saying he would like to set up a multibillion-pound fund to help out small businesses threatened by the crisis.

Speaking as he left for Paris, Brown said he would be proposing a 12-billion-pound (21 billion dollars) fund to his counterparts at the summit.

In Paris, the British prime minister said that he would like the meeting to send out the message 'that no solvent bank be allowed to fail for lack of liquidity.'

He also insisted that the meeting help 'ensure the safety of hard-working families and businesses in each of our countries.'

It is not clear how the summit's participants will react to Brwon's proposal for a small-business fund.

The meeting was preceded by a cross-border quarrel over a plan to create a 300-billion-euro (413 billion dollars) fund to bail out struggling financial institutions, similar to the fund passed by the House of Representatives and signed into law by US President George W Bush late Friday.

Apparently supported by the Dutch and the French, the idea was summarily rejected by Germany and Britain, and will not be on the summit's agenda.

Instead, discussions will likely concentrate on nuts-and-bolts issues, such as increasing control of credit-rating agencies, tightening solvency requirements for European banks, increasing cross-border coordination of bank and insurance-company regulators and changing European accounting rules.

The four leaders will also have to deal with the fall-out from Ireland's decision to establish a 100-per-cent guarantee for depositors in the six Irish-owned banks.

The move, made without consultation with the European Commission, has already attracted investors away from British banks, and has put pressure on the Brown government government to match it.

EU Competition Commissioner Neelie Kroess has slammed the move, saying that it imperils EU cooperation and flies in the face of the EU's state aid and competition requirements.

To bolster confidence, the EU leaders will have to show a united front in dealing with such prickly issues while also agreeing on convincing measures to shore up the European finance sector.