Germany's Merkel backs plan to help E.Europe banks

18:24, 28 January 2009
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But said only existing EU and IMF programmes should be used

German Chancellor Angela Merkel offered support for an Austrian initiative to stabilise emerging European banks but said only existing European Union and International Monetary Fund (IMF) programmes should be used, according to Reuters.

Keen to stop the effects of the global credit crunch from spreading, Austria made proposals on Tuesday for an aid package for financial institutions in European emerging markets and called on other western countries and the EU to contribute.

"Financial stability in eastern Europe is an important matter for us both," Merkel said at a joint news conference with Austrian Chancellor Werner Faymann on Wednesday.

"It is important to send a political signal to these countries," she said.

But she made clear that international programmes already in place would be the best way to harness aid.

"Existing instruments should be used," she said.

The IMF and EU have bailed out Hungary, Latvia and Ukraine with billion-dollar aid packages in recent months, though only when they were near collapse.

Austria, whose banks` are particularly exposed to emerging Europe, intends to form an alliance with the other countries whose banks own most of the region`s lenders -- Italy, Germany, Belgium and France -- to shore up support for its plans.

The financial crisis has led to risk-averse investors dumping emerging market assets, which has left foreign-owned banks as the only source of loans for companies and consumers.

The biggest banks in terms of emerging European assets are Italy`s UniCredit, Austria`s Erste Group Bank and Raiffeisen International, France`s Societe Generale and Belgium`s KBC.

Reuters via Guardian

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