EU leaders agree on financial warning system

Agreeing on a common strategy aimed at restoring the smooth running of the financial system, the 27 leaders of the European Union yesterday endorsed a new financial crisis mechanism that will enable speedy and effective action to be taken by member states in an emergency situation.

According to draft summit conclusions, the new mechanism "may be referred to by member states at any time and will provide immediate and confidential notification to the EU Presidency, the president of the European Central Bank, the President of the Commission and the president of the Eurogroup". The EU leaders agreed that the new mechanism will ensure smooth coordination between those involved and, if appropriate, will suggest a common response.

Council sources said a coordinated approach will ensure that Europe responds effectively and rapidly without distorting the whole European financial system.

Commenting after the first session of the Council meeting dominated by the financial crisis, Prime Minister Lawrence Gonzi said last night that Malta was all for a common European approach.

"Although we are still recuperating, it seems that the decisions made last Sunday by the euro area member states are bearing fruit. However, we now want to settle long-term issues so that this situation will be avoided in the future. We need to reassure European citizens about the financial system and that is why we need to strengthen regulation and supervision," he said.

EU leaders reaffirmed their commitment that the necessary measures will be taken to preserve the stability of the financial system, to support financial institutions, to avoid bankruptcies and protect savers' deposits.

"Such measures aim to ensure sufficient liquidity for financial institutions, to facilitate their funding and provide them with capital resources so that they can continue to finance the economy properly," the draft conclusions say.

EU leaders also heard a presentation by Irish Prime Minister Brian Cowen on how his country aims to solve the issue of the failed Irish referendum that has put the Lisbon Treaty on hold.

Despite the urgency of the matter, sources close to the summit said Mr Cowen did not propose a solution and instead said that his country needs more time, probably until December, to recommend a concrete way forward. This continues to shatter the hopes of EU leaders that the new Lisbon Treaty - providing the EU with new tools to function more efficiently - will be ratified by all member states before the next European parliamentary elections scheduled for June.

If the treaty is not approved by then, as is likely to be the case, Malta will not get a sixth seat at the European Parliament, achieved during the Lisbon Treaty negotiations, and also risks losing the right to have a commissioner in the next European Commission to be appointed in November 2009.

According to the treaty in force, the Nice Treaty, the present composition of the Commission has to be re-dimensioned in order to become smaller.The Commission is made up of one commissioner per member state, which would remain unchanged until 2014 if the Lisbon Treaty is ratified in time.

Asked what will be Malta's position with regard to the commissioner post if the treaty is not approved, Dr Gonzi admitted that the risk of losing the office is there if the new treaty is not approved by mid-next year.

"However, it is still too early to state our position. We hope we won't need to have one and that we will have a commissioner even in the next Commission," he said.

The two-day EU summit is expected to end today.