One day after being buffeted by record stock market losses, European leaders embraced an incremental response Tuesday to the economic crisis.
Analysts across Europe said the agreement could help reassure jittery bank customers, but some warned it would do little to address the financial turmoil that has evoked fears of a worldwide depression.
“It's a safety net, but it won't solve any problems in the financial market,” said Jean-Christophe Caffet, an economist with France's Natixis Bank.
As Iceland's leader warned that his nation was on the verge of economic collapse and Australia made its biggest interest rate cut in more than 15 years, Europe's finance ministers avoided sweeping steps to address the underlying problems.
At a meeting in Luxembourg, the European leaders agreed instead on a plan to head off a panic run on banks by boosting the minimum guarantee on bank deposits from 20,000 euros (about $27,000) to 50,000 euros ($68,000).
The move will have little impact in larger countries like France, which already guarantees individual bank deposits for 70,000 euros.
Instead, it was another indication that differences over how to react to the volatile conditions could make it impossible for the 27-member European Union to agree on dramatic steps.
“I think it is perhaps overambitious to expect the European Union to come up with a solution on a Europe-wide basis,” said Philip Shaw, chief economist at Investec Bank in London. “This is really unlikely to happen.”
At least in the short term, European leaders are expected to continue pursuing national strategies of the sort that have already created widespread uncertainty and anxiety around the world.
The financial turmoil has exposed divisions across Europe over what to do about the crisis.
Initially, France floated the idea of a broad-based bank bailout, but Germany opposed it. Faced with opposition to a European-wide plan, finance ministers who met Tuesday agreed on the short-term step to secure bank deposits.
Some leaders are pushing for individual steps to save banks instead of a broader rescue plan.
“Piecemeal is the only way out,” said Schelkle. “I don't think anyone has a big plan.”
In Asia, investors dumped stocks today in a broad regional sell-off. Japan's benchmark Nikkei 225 stock average plunged more than 5 percent, sliding under the psychologically important 10,000 level for the second straight day. The market is now at its lowest level in five years.