EU leaders to discuss bank crisis

A European financial summit to discuss the current global crisis is set to take place in Paris on Saturday.

Leaders from Britain, Germany and Italy, together with the president of the European Commission and European Central Bank chief, will be attending.

President Nicolas Sarkozy hopes it will lead to a world summit later this year.

Rumours of a 300bn euros (£237bn, $417bn) EU-wide rescue similar to the plan being discussed by the US Congress have been denied by Sarkozy's office.

Calls for European action follow the bail-out of both Bradford and Bingley, which cost the UK government around £14bn, and Fortis Bank, which cost the governments of Belgium, Luxembourg and the Netherlands around £9bn.

Disadvantage

European leaders are keen to agree a co-ordinated response ahead of next week's meeting of the G8 finance ministers and central bank governors in Washington.

Meanwhile, the Irish government's unilateral move to safeguard all deposits, bonds and debts in the Republic of Ireland's biggest banks and building societies for the next two years has raised concerns about competitive disadvantage among UK banks.

However, according to Karel Lannoo from Brussels think tank the Centre for European Policy Studies, it is a mistake to allow individual European countries to deal with their own banks.

"Most of these banks, certainly the 50 largest European banks have outgrown their national boundaries," he said.

"They are no longer a Belgian or a French or a German bank - they have in many cases the majority of their employees outside their home country."

'Nation-by-nation'

However, the BBC's Emma Jane Kirby in Paris said there is little agreement on how the Paris talks should proceed.

Germany has made its opposition to any coordinated European bail-out plan known ahead of the meeting, while the chairman of eurozone finance ministers has also rejected any need for a European rescue fund for distressed banks.

Eurogroup chairman Jean-Claude Juncker said Europe did not need a similar programme to the US's $700bn (£396bn) plan to take so-called toxic assets off banks' balance sheets.

British Prime Minister Gordon Brown is also sceptical of the need for any Europe-wide plan.

According to the BBC's Europe correspondent, Mark Mardell: "Downing Street prefers the case-by-case, nation-by-nation solutions that have been happening so far."

However, a French civil servant is reported to have proposed a 300bn euro bail-out fund, and the Netherlands has proposed the creation of a European reserve fund to come to the aid of ailing banks before they fail.

Despite the differing views, Gordon Brown's spokesman said he did not expect discussion of an EU-wide bank fund at the meeting.

"The purpose of the meeting will be to discuss how each of the four major economies in Europe are responding to the global financial crisis," he said.