European Bank Crisis

Although the subprime mortgage crisis originated in the United States, the bank failures have spread, affecting markets in European countries. The governments of England and Germany have had to bail out or nationalize several banking and real estate institutions, and several countries in the European Union are facing similar difficulties.¹

European Union leaders have proposed guaranteed bank refinancing for any country that uses the Euro as currency. The measure would be temporary and be in effect through the end of 2009. The proposal will be put to the full 27 members of the EU the week of October 12 for final approval.²

Fast Facts

Britain and France are in a recession¹

Germany's second largest property lender Hypo Real Estate collapsed, and a bailout deal collapsed after commercial banks withdrew their support³

Governments of Iceland, Belgium and the Netherlands have had to nationalize or seize control of failing banks³

Ireland refused to bail out the collapsing Depfa Bank, owned by troubled lender Hypo Real Estate⁴

Leaders in Saturday's summit were not specific, but asked for improved financial supervision and coordination¹

$41.5 billion promised for small businesses¹

UK nationalized mortgage companies Northern Rock and Bradford and Bingley⁵

October 4 Summit

A summit was held on October 4, 2008, among leaders from Britain, France, Italy and Germany over the crisis. They pledged to work together to "speed up" a $41.5 billion package to help businesses, but remained divided on whether a joint EU bailout plan would be wise.¹ Germany meanwhile guaranteed the safety of its citizens' private bank accounts during the crisis.⁵