Economy minister rejects Europe-wide bank bailout

German Economy Minister Michael Glos has ruled out a US-style bailout for Europe’s struggling banks ahead of a summit on the financial crisis in Paris of Europe’s four biggest economies.

Economy minister rejects Europe-wide bank bailout

In an interview with tabloid Bild am Sonntag, Glos said a “rescue plan for Europe” proposed by some banks deflected from the real task. “Now the banks have to consult each other and take common steps so that mutual trust can be re-established,” Glos said.

The conservative minister said the lack of trust among banks was at the heart of the crisis.

“In such a situation, to ask the government to put taxpayers’ money at risk by creating a fund to reduce debt …and ward off the loss of confidence to me seems unjustifiable,” Glos said. “Highly paid bank managers, who have up to now given politicians hackneyed economic advice, must now show that they are worth their money.”

French President Nicolas Sarkozy, current president of the European Union, has called a mini-summit of Europe’s four biggest economies in Paris Saturday afternoon. German Chancellor Angela Merket, British Prime Minister Gordon Brown and Italian Prime Minister Silvio Berlusconi will be attending.

European leaders are hoping to forge a common position on how to tackle the financial storm sparked by the US banking crisis ahead of the Group of Eight meeting of finance ministers in Washington next week.

German Chancellor Angela Merkel, whose government has come up with a rescue plan for troubled commercial mortgage lender Hypo Real Estate, has also opposed any Europe-wide rescue fund. Earlier this week, the chancellor ruled out writing “blank cheques” for banks, “whether they have behaved responsibly or not.”

Some economists have warned that leading European banks have high leverage ratios of total assets to shareholders’ equity, which in the event of trouble could mean they would need help similar to that extended to banks in the United States, Iceland, Ireland and the Benelux countries.