World financial crisis

EU ministers meet to take emergency action

Article published on the 2008-10-07 Latest update 2008-10-07 11:10 TU

A dealer tends tired eyes in Tokyo
(Photo: Reuters)

European finance ministers meet in Luxembourg on Tuesday, promising an action plan to protect savings after a disastrous day on the world's stock exchanges. Asian markets recovered silghtly, while Europeans opened up slightly. The latest country to be forced to take over a major bank is Iceland, which has won a four-billion-euro loan from Russia.

EU finance ministers are considering raising the amount of bank deposits guaranteed by states to 100,000 euros. At present EU law requires states to underwrite at least 20,000 euros if a bank goes broke.

Germany offered a blanket guarantee on bank deposits on Sunday and Austria, Britain, Denmark, France, Portugal, Spain and Sweden say they are planning similar action.

The European Central Bank Tuesday pumped 37 billion euros into interbank money markets, as an EU statement promised to keep the liquidity coming, but the bank is resisting pressure to lower interest rates, arguing that the danger of inflation still exists.

The Icelandic Financial Supervisory Authority says it will take over the country's second-largest bank, Landsbanki, and Moscow announced that it will loan its central bank four billion euros.

Shares in British bank Royal Bank of Scotland plunged 30 per cent on Tuesday, amid fresh concerns over the crisis.

French stocks lost 0.2 per cent, despite earlier gains, after plunging more than nine per cent on Monday. London and Frankfurt rose early in the day.

Asian markets rallied after Australia's central bank slashed interest rates by 100 basis points to six per cent, its biggest cut since 1992.

Crude oil prices rebounded to more than 90 dollars a barrel in Asia.

Moscow's two main stock exchanges said they would remain closed on Tuesday morning.

Finance chiefs for the Group of Seven nations will meet on Friday in Washington.