COMMENT If it has been such a struggle for the Bush administration to command support for a financial rescue from its own side in Congress, how much worse would the situation be if pan-European action was needed to shore up the European Union’s banks? Nicolas Sarkozy, France’s president, and Peer Steinbrück, the German finance minister, each opined last week on the superiority of a more regulated model. More cautious Europeans were looking at Europe’s vulnerable banks, and asking what would happen if a big player stumbled. Europe has many banks that are too big to fail; some fear that relative to national governments they are also too big to save.
At first glance, the rescue of Fortis by the Belgian, Dutch and Luxembourg governments looks reassuring. The authorities injected capital with impressive speed. This matters: Fortis may not be a global household name, but it is the largest European financial institution to be bailed out. Its liabilities dwarf Belgium’s gross domestic product, it holds half that country’s deposits, and is Belgium’s largest private employer. It clearly could not have been allowed to fail.
