Euroland to guarantee bank loans

The G7 meeting seemed on the surface to be a disappointment as the overall G7 statement only presented general principles for action instead of specific measures, said Danske Bank. rnrnHowever, Euroland followed up on Sunday night presenting a coordinated plan which included a state guarantee on all bank loans through 2009 and money to recapitalise the banking system will be set aside. Country-specific plans are likely to be presented on Monday. The measures now being taken address both liquidity issues as well as solvency issues in the banking system. rnrnBank guarantees should help to make money markets function again and a recapitalisation of banks will ensure that the major banks can continue their operations. These are very important steps in containing the crisis and ensuring that financial flows can again get to the real economy. It may very well take a while for both money markets and risk markets to recover but the measures now taken should work to provide a turning point in the financial crisis. Governments seem committed to take further measures if necessary.rn