Kudos to Hank Paulson for trying to get his overseas counterparts to aid their banks. After a frantic weekend, Europe has gotten religion on the subject. Reuters quotes a European government source as saying France will propose a EUR 300 bln rescue plan for EU banks. Each country will be expected to contribute 3% of GDP to the rescue plan.
Essentially the Stability Pact, the bedrock of EU budget discipline would have to be suspended. This is a big deal. The proposed US plan equals roughly 5% of GDP, to put things in perspective.
Germany has immediately dismissed the plan which took the steam out of a EUR rally to the 1.4060s.
