Financial Crisis Pan-European plan to save banks 12/10/08 23:17 CET

Eurozone leaders have agreed emergency measures to protect European banks and prevent further falls in world markets. In a coordinated action the governments of the single currency area will pump as yet unspecified amounts into banks reeling from the financial crisis. The sums involved are to be announced at a national level, starting with France, Germany and Italy on Monday.

The propsoals will be put to non-eurozone EU states at a summit on Wednesday.

“Today I am convinced that we are taking the right risk for Europe, for our citizens and for our businesses,” said the President of the European Commission, Jose Manuel Barrosso. “The commitments must be kept. Member states must now use the common foundation created this weekend in a way that restores confidence and brings to an end to the excessive market pessimism we have seen in recent days.”

EU leaders have undertaken to guarantee loans between banks until the end of next year. The plan allows for individual member states to inject capital into their own banks by purchasing preference shares. This is meant to complement efforts by the European Central Bank to unfreeze inter-bank lending markets. The leaders had been under pressure to clinch a deal ahead of the opening of world markets.