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Financial crisis puts EU unity under test
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The European Union (EU)'s much-vaunted unity now is under a real test as a contagious financial crisis unseen since the Great Depression has devastated the whole continent this year.

Although efforts have been made to seek a coordinated EU response to the financial crisis, split are emerging between member states as they put their own national interests first.

European bailout fund rejected

Triggered by the collapse of the U.S. banking giant Lehman Brothers, the financial turmoil escalated into a full-fledged crisis in September.

As its financial system has been so interwoven with that of the United States, the EU soon fell prey to the crisis, with its financial institutions either exposed to huge losses in the U.S. financial market or suffering severe shortage of liquidity.

Britain's mortgage lender Bradford & Bingley, Dutch-Belgian banking group Fortis and French-Belgian bank Dexia became the first European victims of the financial crisis, forcing EU governments to infuse billions of euros to keep them afloat.

The initial actions were taken by individual or several countries on an ad hoc basis. But cracks appeared in the EU's unity when Ireland unilaterally guaranteed all deposits in its own banks to calm nervous savers, a move siphoning safety-seeking money away from other EU banks.

The fragmented approach created the impression of disorder and sent confused signals to financial markets, arousing concerns it may further undermine confidence.

While the U.S. government unveiled a 700-billion-U.S.-dollar package to bail out troubled banks, a similar plan had been floated for a joint EU fund.

But it was firmly rejected by Germany, which was reluctant to commit taxpayers' money to an EU-managed fund.

Coordinated action launched

Despite the rejection of a European bailout fund, calls for coordinated action strengthened as the financial crisis deepened in the EU.

"We are asking and urging member states for closer cooperation. It is critically important for confidence in the markets," European Commission President Jose Manuel Barroso said in early October. "It is not just a problem of injecting liquidity. We also need to inject credibility in the European response."

In an urgent bid to restore financial stability, leaders from the 15 euro zone countries hammered out a joint action plan for a coordinated response at their first ever summit in Paris on Oct. 12.

The action plan, which saw European governments buy in banks to boost their finances and temporarily guarantee bank refinancing to ease the credit crunch, was then endorsed by all EU leaders at a broader summit three days later.

As Barroso put it, the joint action plan served as a "toolbox," in which EU member states could choose their own national measures.

Based on the plan, EU governments finally mounted a unified attack against the financial crisis, pledging more than 2 trillion euros (2.78 trillion dollars) so far on their national bailout packages.

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