Ruling out US-style bailout plan, EU looks to tougher regulation

(BRUSSELS) - Europe does not need a US-style bailout plan for the financial sector, top EU officials said Wednesday, limiting their response to the current crisis to calls for tougher regulation.

"The situation we face here in Europe is less acute and member states do not at this point consider that a US-style plan is needed," EU Economic and Monetary Affairs Commissioner Joaquin Almunia told the European Parliament.

Speaking on behalf of the French Presidency of the European Union, French Europe Minister Jean-Pierre Jouyet also ruled out the possibility of Europe following in US footsteps.

"Member states aren't envisaging at this stage an initiative like the American federal authorities have announced to buy toxic products on a large scale from financial actors," he said.

US Treasury Secretary Henry Paulson announced last week plans for the government to buy up to 700 billion dollars in bad debts held on banks' balance sheets which are threatening the broader stability of the financial system.

Instead of costly bailout plans, Almunia and Jouyet stressed that Europe's answer to the crisis should focus on better regulation.

"The latest events in financial markets have made it clear that the current model of regulation and supervision needs to be revamped," Almunia said.

"Regulation is not the enemy of the market," Jouyet told EU lawmakers. "It's up to public authorities to adapt the rules because what's at stake is the protection of individual savers and depositors (and) also growth and jobs."

The European Commission is due to publish proposals next month on capital requirements for banks and for oversight of credit rating agencies, which have come under fire for failing to alert investors to the risks that triggered the current crisis.

Despite those efforts, French Socialist Pervenche Beres, who heads the parliament's financial affairs panel, warned that many of the calls from member states and Brussels for action were proving to be hollow.

"There's a problem with governments not trusting each other when it comes to tightening financial regulation and with the commission not being up to the task," Beres told reporters.

Warning that Europe would be marginalised if it continued to sit on its hands, she said: "We have got to harmonise our legislation and have Europe-wide action."

On Tuesday, EU lawmakers called on the commission to come up with more ambitious proposals to improve regulation of the financial sector, targetting hedge funds and private equity firms in particular.

Jouyet acknowledged the authorities needed to do some "deep thinking" about remuneration and bonus packages for high-flying wheeler-dealers who devised many of the securities at the root of the current crisis.

"This is not just an economic and financial crisis, it's a crisis of ethics," he said.

Leader of the Socialists in the parliament, German lawmaker Martin Schulz, also saw deeper moral problems underlying the crisis, which he said dealt a fatal blow to the credibility of the US model of capitalism.

"We're not only seeing the bankruptcy of investment banks, it's the bankruptcy of an economic philosophy," he said.