The leaders of the 15 euro-zone nations said their governments would guarantee interbank loans to increase lending. Germany, France and other nations also said they would announce details of national rescue plans soon.
EU leaders called for the US to join them in reforming the global finance system
Heads of the euro-zone members said they hoped by guaranteeing loans banks would once again begin extending credit to each other, the leaders said in a statement on Sunday, Oct. 12. The reluctance of banks to make loans is at the heart of the ongoing finance crisis.
While saying market operators need to recognize the scale of the challenge the world faces, French President Nicolas Sarkozy, who chaired the meeting, said the common action plan "addresses all aspects of the financial crisis."
"The crisis has over the past days entered into a phase that makes it intolerable to opt for procrastination and a go-it-alone approach," he said, adding that the European Union would ask the United States to jointly organize an international summit to reform the international finance system.
Leaders did not reveal the total size of the cash engagement implied by their measures for taxpayers across the continent.
Much work remains
Many hope the weekend's news will bring relief when market reopen
European Central Bank head Jean-Claude Trichet endorsed the plans made at the summit, saying they showed a "fundamental element of confidence." But he also added that there was still much for Europe to do in order to stabilize markets and improve the bloc's economic situation.
European Commission President Jose Manuel Barroso, who was also present at Sunday's meeting, called the decisions made by euro-zone leaders "an essential stage of a very urgent procedure." He called for European Union member states to coordinate their policies for the gradual restoration of confidence.
"We have taken the right course for Europe, for our businesses and our citizens," Barroso said, adding that it would "bring to an end the excessive pessimism of the markets."
The European leaders were working against the clock to put together a bank rescue strategy that would restore at least some confidence in stock markets after a week of losses unseen since the financial crisis of the 1930s.
British Prime Minister Gordon Brown said after the Paris meeting, "I believe that in the next few days confidence in the banking system will be restored."
Details of national plans to follow
Germany hopes to hammer out an agreement quickly on its rescue package
France, Germany and Italy would all unveil the details of their national bail-out packages on Monday, Sarkozy said.
Germany is expected to guarantee interbank loans with between 300 euros and 400 billion euros and to provide banks with fresh capital in exchange for shares, according to media reports.
German Chancellor Angela Merkel said only the state could now restore "the necessary trust" to the public and financial markets.
"Tomorrow Germany will get to grips with its package of measures," Merkel said, describing the action plan adopted with fellow European leaders as a "tool box" of possible measures. "Other countries too will also rapidly take measures so that ... an important signal can be given to the markets."
The French government will on Monday propose a state guarantee for banks endangered by the financial crisis, a ruling party deputy told the AFP news agency.
European finance officials have said the news measures will cost several hundred billion euros on top of the huge sums already spent rescuing banks and supporting money markets. Britain, which has already committed more than $700 billion to a bank rescue, was to take controlling stakes Monday in two major banks worst affected by the crisis, according to media reports.
Ahead of the euro-zone summit, International Monetary Fund head Dominique Strauss-Kahn said "intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown."
But he added that an action plan adopted by the Group of Seven most wealthy nations was a breakthrough with the first global pledge to cooperate to stabilize the turmoil at the meetings.