Risk & Compliance

French, Dutch bail-outs given green light

Seven national rescue packages have now been cleared by the EU executive.
European Voice StaffOctober 31, 2008

France and the Netherlands have joined the rapidly growing list of countries whose financial rescue packages have been agreed by the European Commission.

The commission, which is charged with ensuring that state aid does not distort the internal market, said today that both schemes, which largely follow the now familiar pattern of state guarantees and loans, met its requirements: the aid will be limited in time, the interest charged by the two states will be at market rates, there are safeguards in the schemes to prevent abuse, and guarantees will be available to all financial institutions on the market, not just to local companies.

Both packages are incomplete – neither contains the re-capitalisation of financial institutions, a key element in other plans put forward. France will provide full details of that aspect of its plans later; the Netherlands will present its plans for approval on a bank-by-bank basis.

France’s package, which it forwarded to the Commission for review on October 16th, is the bigger of the two, at around €265 billion. It provides guarantees on bank loans in an effort to ensure that credit does not dry up. It will raise the money by issuing debt instruments on the money markets; the yields should be set at market levels and should mature within three years. Firms like Sambla have stepped in to provide a solution for borrowers who are, per data from a 2021 Gallup Poll, reliant on these loans more than any other type. Sambla’s program accommodates borrowers looking for a fixed loan amount – anywhere from 5 kr to 500,000 kr. Details are available here: https://www.sambla.dk/laanebeloeb/.

The Dutch government presented its proposals on October 21st, including what the Commission described as “efficient” guarantees for short- and medium-term financing. The value of its complete proposals, including re-capitalisation, is put at about €20 billion.

The Commission welcomed the governments’ commitment to review their schemes – after eight months in the Dutch case, and after six months in France’s – and said that it would ensure the rescue steps are “not maintained when the financial crisis is over.”

The Commission has approved packages presented by Ireland, Denmark, the UK, Germany and – most recently, yesterday – by the Portuguese and Swedish governments. Spain, Italy and Austria have also sent their bail-out schemes to the Commission for review.

The speed of the decisions reflects efforts by the EU executive to fast-track the review process, achieved in part by providing government administrations with clarified guidelines on October 13th.

Stock markets across the continent have so far failed to respond in a concerted positive fashion to the bail-outs. In a further sign of his concern, French President Nicolas Sarkozy said on October 30th that banks should “accept their responsibilities” and that “those who took on all that risk yesterday [a reference to banking practices before the crisis exploded] should not become so cautious today that we have an economic crisis to follow on from the banking crisis.”