French government to bankroll the banks

Following the stance of both the UK and the US, France has now followed suit as European governments are now using public money to prop up the banking system in order to break the deadlock in lending.

The French government will buy out debt from the major banks including BNP Paribas and Société Générale.

In return, Finance Minister, Christine Lagarde, said that the banks will have to boost lending to companies and consumers as part of their end of the deal in order to increase the flow of capital.

As things now currently stand Britain, France, Germany, Spain and the Netherlands have thus far given more than 2 trillion euros to guarantee bank loans so as to add security to the fragile banking system.

Jonathan Tyce, a London-based analyst at Fox-Pitt Kelton, has said that the Europeans have been quicker off the mark in understanding the needs of their banks and the scale of the trouble that they were in regarding liquidity.

The move by the French has also coincided with the fact that Sweden has now announced a bail-out of its financial sector having pledged more than 1.5 trillion kronor to support financial groups as well as offering a “financial stabilisation fund”.

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