The European flag is fluttering a little higher today; the yellow stars look a bit brighter; the strains of Beethoven’s 9th seem just a tad more stirring. For after what some have harshly called a period of terrified under-activity the EU has pounced into action.

The impact was immediate and heartening. World stock markets soared after a meeting of European finance ministers resolved to “do something” about the eurozone financial crisis. In Luxembourg ministers emerged from an all-day crisis meeting unified and certain that things had now become “really serious” and that “firm action” could be counted upon. After some months of disagreement the 17 nations are as one. The spirit of unity is now so strong that France and Germany have for example “agreed to differ”.

Indeed, so great is their new strength of purpose that in a move, the audacity of which stunned onlookers, the leaders have now asked officials from the European Commission in Brussels to “come up with some ideas” as to what the something they might do could be. One veteran Brussels watcher observed that you could tell it was serious because the ministers had told officials to “see if they could work something up” within the next few weeks – the kind of fierce deadline that sends a real sense of purpose through the organisation.

It is understood that ministers have narrowed the range of options to preventing a Greek default; not preventing a Greek default; delaying a Greek default for a while and then permitting it; and letting Greece default but giving serious thought to stopping any of the other eurozone outliers from taking the same path.

Officials are studying plans to save the eurozone banks either by recapitalising them at national level, telling them to recapitalise themselves or instigating some new stress tests to prove definitively that this time the banks do not actually need recapitalising at all. There has been criticism in some quarters that the first two stress tests were not robust enough in proving the solidity of eurozone banks and that new tests will be needed to show just how strong they really are. “Just because banks have got into trouble in spite of passing the tests doesn’t mean there was anything structurally wrong with the tests,” said one official. “But we are determined to keep doing them until people take them seriously.”

European officials admit there is still the odd i to dot and t to cross on the bail-out plan. “We are still pinning down how it will work, when it will start and how it will be funded, but most of the heavy lifting is now done,” said one of those familiar with the discussions. They are now confident they will have these details ironed out in time for next month’s Cannes summit, or maybe the one after that.

Even the UK, long an opponent of deeper European integration, has rallied around and now supports more fiscal harmony among eurozone nations. One of those present said the ministers were particularly heartened when George Osborne, the UK chancellor, jetted in with some really valuable constructive advice including “get a grip”, “sort it out” and “do whatever it takes as long as you leave us out of it”.

One idea gaining traction is for the eurozone to leverage up its emergency facility, the EFSF, so that it can offer far more guarantees than it can actually afford. One insider noted: “The attraction of this fund is that it’s fireproof as long as we never have to use it.”

It is understood ministers were also deeply moved by Ben Bernanke’s observation to Congress that the US was an innocent bystander. “We had laboured under the impression that the entire crisis started in the US and with its banks selling toxic packages to Europe. Now we understand they are the wronged party in all this, we are determined to act.”

Deregulation drive

David Cameron had few new baubles to unveil in his annual address to the Conservative party conference. But one stood out. He rounded on the over-the-top criminal records checks required of anyone working, even voluntarily, with children. Intended to prevent child abusers getting jobs in schools, the laws have been so framed as to catch even Saturday soccer coaches or drivers of the team bus. It is a good candidate for reform but presentation will be everything. The Conservatives may pride themselves on being the party of deregulation, but cutting red tape for child abusers may be a hard sell.

Get alerts on European banks when a new story is published

Copyright The Financial Times Limited 2021. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article