US-style 'financial socialism' not an option for Europe
The EU's economic and monetary affairs commissioner, Joaquin Almunia, has said Europe should not employ what he called "financial socialism" to solve the ongoing banking crisis by bailing out failing companies.
"Socialists like me, we are against financial socialism," he said, alluding to the multi-billion-dollar supports and nationalisations of recent weeks that Washington has engaged in to save a host of financial institutions it argues are "too big to fail."
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The commissioner - a member of Spain's centre-left Socialist Workers Party - speaking at a Madrid conference organised by Spanish bourse regulator CNMV, did nonetheless say such measures were warranted where the financial system as a whole was threatened, however.
"No one can say that there won't be anyone in Europe who will have to face a solvency problem that poses a systematic risk to the financial system," he said, according to Dow Jones Newswires.
Despite his veiled criticism of how the Bush administration has responded to the crisis, he said Europe was prepared to step into markets if the situation ever deteriorated to such a level.
"The economic authorities, financial authorities and central banks are prepared if that case were to occur in Europe," he said. "I hope it won't happen in Europe, but no one can rule it out either."
"During a financial crisis, there are different types of support, with public funds, taxpayers, which are justified by the systemic risk," he added, reports Reuters.
The commissioner said the current upheaval may continue for some time. "We still have no idea how long this turbulence will last and when normality will return to the markets."
He also said dealing with the crisis required greater co-ordination by European financial authorities.
"We need more coordinated action by supervisors than currently exists ... We must move forward faster, we cannot wait until a financial institution operating in seven or 10 countries of the European Union has problems such as those of Lehman Brothers or Bear Sterns."
In separate news on Thursday, central banks worldwide pumped €126 billion into markets in an attempt to boost liquidity.
The money was released by the US Federal Reserve to five other central banks who then made it available to financial institutions domestically.
The European Central Bank is to make €39 billion available and the Bank of England €28 billion. The Swiss National Bank and the Bank of Canada also participated in the operation.