With the European Commission scheduled on Wednesday to release proposals to recapitalize Europe’s banks, France announced its own detailed plans aimed at protecting its most vulnerable financial institutions.
Alain Juppé, the French foreign minister, told the National Assembly that several leading French banks like BNP Paribas, Crédit Agricole and Société Générale, which are deeply exposed to the sovereign debt of Greece and other Southern European countries, would move to increase their capital reserves, initially by using their own revenue or through the financial markets. Money from the government would be drawn upon only as “a last resort,” he said, according to Reuters.
But Mr. Juppé said that the move, which was agreed upon with Germany during talks on Sunday, meant the banks’ best buffers against losses — so-called core Tier 1 capital — would increase to 9 percent or higher, from 7 percent, by 2013.
It was unclear whether any of that money might be drawn from the proposed euro zone bailout fund rather than directly from French government funds.
The issue is particularly sensitive in France because of fears that the country could lose its triple-A credit rating if it had to inject billions of euros into its banks. That would be a huge political setback for the French president, Nicolas Sarkozy, who faces election next year.
The French announcement on intervention came as the euro zone entered a critical countdown, with investors in financial markets expecting a European Union summit meeting on Oct. 23 and the leaders of the Group of 20 leading economies Nov. 3 to endorse major decisions to help resolve the European debt crisis.
Meanwhile, lawmakers in Slovakia voted late Tuesday to reject the expansion of the euro rescue fund. The 440 billion euro, or $601 billion, rescue fund, approved by the 16 other members of the euro currency zone, was entwined with the domestic politics of Slovakia, the small former Soviet bloc country. Officials here in Brussels were weighing the possibility of a different way to circumvent the problem if Slovakia failed to pass the measure.
In Brussels, Jean-Claude Trichet, the departing president of the European Central Bank, underlined the urgent task confronting European leaders, who have consistently failed to rise to the challenge.
“Sovereign stress has moved from smaller economies to some of the larger countries,” Mr. Trichet told European lawmakers. “The crisis is systemic and must be tackled decisively.”
The French bank recapitalization plan was expected to complement proposals from the European Commission, whose president, José Manuel Barroso, said that he would offer proposals Wednesday to protect Europe’s banks from potential losses from the sovereign debt that they hold from Greece, Portugal, Italy and Spain.
Like the French-German plan, the European proposals were likely to emphasize that taxpayer money would be used only as a last resort.
Meanwhile in Athens, there was a breakthrough in negotiations over Greece’s efforts to get its public finances under control to qualify for vital international aid. Representatives from the International Monetary Fund, the European Commission and the European Central Bank said that Greece’s next slice of loans, totaling 8 billion euros, would most likely be disbursed in early November after approval from euro zone finance ministers and the I.M.F.
The statement from the representatives of the so-called troika ended weeks of stalemate between the Greek government and its international lenders, and concluded a period of brinkmanship that intensified last week when European finance ministers postponed a decision on whether to approve the loan.
Now, after lengthy negotiations, the declaration Tuesday paved the way for the release of enough money for Athens to pay its bills and postpone any unplanned default or restructuring of its debts.
The troika will have to submit a full report for approval by euro zone finance ministers, who will gather before the Oct. 23 European summit meeting, and by the I.M.F. board, which is expected to meet in early November.
Stephen Castle reported from Brussels and Niki Kitsantonis from Athens.
Article source: http://feeds.nytimes.com/click.phdo?i=a878a6b0a344c5811eaa0ffe5e028561
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