2nd UPDATE: France,Germany: Common Approach Needed On Crisis

(Updates with more Brown comment, adds background)

By Gabriele Parussini, Nathalie Boschat and Ruth Bender

Of DOW JONES NEWSWIRES

PARIS -(Dow Jones)- France and Germany Saturday said a common approach to tackle the global financial turmoil is needed, as they played down an apparent disagreement that emerged over the past week.

Going into an emergency meeting that French President Sarkozy called in Paris, German Chancellor Angela Merkel said there was "a high degree of similarities between (European positions) to insure that such a crisis won't happen again."

Added Sarkozy: "What Angela Merkel said, you just need to translate in French."

Merkel also said that the "global financial crisis needs a global response."

She and Sarkozy spoke to the press ahead of the meeting of leaders of the European members of the Group of Eight leading countries, along with Eurogroup Chairman Jean-Claude Juncker and European Commission President Jose-Manuel Barroso and European Central Bank President Jean-Claude Trichet.

The summit takes place a week ahead of the Group of Seven meeting of finance ministers in Washington next week.

"In today's world, Europe must show the will for a solution. That will reassure everyone, including savers," Sarkozy said.

Merkel said that "those who caused the damage will have to contribute to the global effort.

Though later denied by several European governments, the idea of a EUR300 billion Europe-managed fund had been floated ahead of the summit, but both Germany and the U.K. rejected the idea, supporting instead a case-by-case approach.

The Netherlands proposed that all member states put the equivalent of 3.0% of their gross domestic product in a similar safety fund, while Ireland decided to guarantee its banks balance sheets for an amount worth over twice its gross domestic product, and Greece followed suit Thursday night.

However, France and Germany ruled out a similar plan, and the U.K. complained about the plan distorting competition.

Friday, Trichet said European governments need to coordinate to face the current financial crisis, and that the summit called Saturday in Paris will produce a common approach to the turmoil.

"Surely, a common sense of direction" will emerge from the Paris summit, Trichet said Friday.

Still, going into the meeting Saturday, U.K. Prime Minister Gordon Brown seemed to emphasize each country's responsibility in sorting out the crisis.

"It has to be clear that every country present at this summit will want to do whatever is necessary to secure the stability of the system and to ensure the safety of hard-working families and businesses," Brown said to the press.

"I want the message to go out that no solvent bank should be allowed to fail for lack of liquidity," Brown also said, adding that was the reason why the U.K. government took action Friday to extend liquidity available to the banking system.

"We will take the necessary action to sort out whatever failing exists in the system," Brown told the press ahead of the meeting.

Brown noted that the Paris summit follows another European summit that was held in London in January.

Due to a complex institutional framework and multiple layers of decision-making, Europe's reaction is trailing that of the U.S. The U.S. government's $700 billion financial-sector rescue plan was approved last week and signed by President George W. Bush.

For all the confusion reigning in the E.U, some officials see the turmoil as a chance to gain weight on the international scene, as the U.S. is weakened politically and economically.

Friday, French European Affairs Minister Jean-Pierre Jouyet said Europe now has a platform to argue for state regulation of the economy as an alternative to the U.S.- style free-market model.

"They are no longer in a position of strength, on the economic level as well as the geo-strategic level," Jouyet said, echoing even blunter remarks by German Finance Minister Peer Steinbrueck, who said last week the turmoil will leave deep marks on both sides of the Atlantic, but that the U.S. has more to lose.

"The United States will lose its superpower status in the world financial system," Steinbrueck said last week. "The world financial system will become more multi-polar."

-By Gabriele Parussini, Nathalie Boschat and Ruth Bender, Dow Jones Newswires; +33-1-4017-1740; gabriele.parussini@dowjones.com

(Geraldine Amiel contributed to this article.)

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(END) Dow Jones Newswires

October 04, 2008 12:53 ET (16:53 GMT)


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