Analysis

Article excerpt

BRUSSELS - Like frightened sardines sighting a killer whale, the European Union's leaders have rediscovered strength in unity.

Now, they want to take on the world.

After weeks of dithering and patchwork responses, EU heads of state and government meeting in Brussels on Wednesday and Thursday were to agree on a common European response to the global credit crunch.

"After a few false starts, Europe has shown that it is capable of acting," said Austrian Chancellor Alfred Gusenbauer on arrival in Brussels.

On Sunday, heads of state and government from the 15 EU member states that share the euro adopted in Paris a wide-ranging rescue plan inspired by British Prime Minister Gordon Brown.

With a potential combined cost of 2 trillion euros (2.7 trillion dollars), the eurozone plan is bigger and better than a similar package approved earlier by the United States, European commentators gleefully note.

The European plan envisages guarantees designed to ensure that banks start lending out again. It also allows for the partial nationalization of shaky financial institutions through a liquidity- for-shares swap.

And after a series of unilateral moves from Ireland and Germany that infuriated their neighbours, governments also agreed to unanimously raise minimum state guarantees for bank deposits, from 20,000 euros to 50,000 euros.

Such concerted action appeared to work on Monday and Tuesday, with European stock markets rallying during the two days that followed the Paris meeting.

But despite shares plunging again Wednesday amid fears of a global recession, emboldened EU leaders decided to raise the bar even further by saying they would now fix the rest of the world.

"For the first time in financial history, it is plans worked out in the European Union which have inspired the measures taken in other countries of the world, including the United States," said French President Nicolas Sarkozy, whose country holds the rotating presidency of the EU.

"The system must be completely overhauled, an overhaul that must be global," Sarkozy said.

British Prime Minister Gordon Brown gave substance to Europe's future intentions by calling for "a 'new Bretton Woods'. …