EUROPEAN REACTION:ITALIAN PRIME minister Silvio Berlusconi said he would not allow savers in Italy to lose any of their deposits as the crisis in the global financial system threatened to spread deeper into Europe.
France is also reported to be considering a similar deposit guarantee scheme to the Irish Government's plans, as European governments seek to limit the impact of the crisis in the global financial system.
Angel Gurria, head of the Organisation for Economic Co-operation and Development, which has compared and contrasted deposit insurance schemes around the world, said in a report published yesterday that European countries may have to agree a co-ordinated plan to halt damage to their banking sectors.
"Considering the exposure of European financial institutions, we might have to start thinking of a systemic plan for Europe if things don't improve on the other side of the Atlantic," Mr Gurria said.
"The piecemeal approach may not work in Europe either."
European countries, ranging from Ireland to Germany, have stepped in to rescue ailing banks this week as the world has waited with increasing anxiety for the US Congress to approve a bailout package.
US legislators could vote on a new bailout plan early today after Congress on Monday shocked investors by throwing out an initial $700 billion rescue scheme.
Jose Manuel Barroso, president of the European Commission, said he was working with French president Nicolas Sarkozy and the European Central Bank to present proposals to leaders of the big four European powers at a meeting tentatively set for Saturday.
But the French government said no firm date had been fixed for the meeting, which officials said would take place only if there was a sufficient consensus on a joint approach.
"It's not just a problem of injecting liquidity," Mr Barroso told a news conference.
"We also need to inject credibility in the European response. That's why we are urging member states [to embrace] . . . closer co-operation."
Yesterday the EU executive unveiled proposals for tougher EU bank regulation.
Mr Barroso said the fact that EU member states, acting together or alone, had rescued several European banks this week showed the existing system of regulation, based largely on national governments and regulators, could cope for now.
But in the longer term, he said, the EU needed to go further in co-ordinated action to restore full confidence. "We need a further strengthening of the supervision structures at European level."
Christine Lagarde, the French economy minister, is also calling for the creation of an emergency fund for European banks, according to German newspaper reports. Germany, which earlier this week injected billions of euro into troubled lender Hypo Real Estate, wants to stick to a piecemeal approach, leaving governments to address problems on a case-by-case basis, while pushing for stronger regulation at an international level.
"The federal government cannot and will not issue a blank cheque for all banks, regardless of whether they behave in a responsible manner or not," chancellor Angela Merkel told Bild daily in an interview to be published today.
Ireland's decision on Tuesday to guarantee all deposits in Irish banks is to be reviewed by Brussels as possibly constituting illegal state aid. - (Financial Times service)