European Leaders Agree to Inject Cash Into Banks

Government leaders from the major European Union members posed on the steps of the Élysée Palace in Paris on Sunday during their economic summit.

PARIS — European financial and political leaders agreed late Sunday to a plan that would inject billions of euros into their banks in a bid to restore confidence to the teetering financial system.

Taking their cue from a rescue plan announced last week by Britain, the European countries led by Germany and France pledged to take equity stakes in distressed banks and vowed to guarantee bank lending for periods up to five years.

Both France and Germany were planning to unveil national rescue packages on Monday worth hundreds of billions of euros, officials said.

“The meeting that we had was exceptional,” President Nicolas Sarkozy of France, said at a news conference. “We need concrete measures, we need unity. That’s what we achieved. The plan on which we agreed today will be applied in all our respective states.”

“The goal is to kick-start the interbank lending market,” he said.

President Nicolas Sarkozy of France, left, welcomed Prime Minister Gordon Brown of Britain to the Élysée Palace

The plan “treats all the dimensions of the financial crisis,” Mr. Sarkozy said.

The Belgian finance minister, Didier Reynders, said, “We are committed in all European states to recapitalize banks if we establish a threat to solvency and a risk to the economy.”

“The goal is to kick-start the interbank lending market,” he said.

Mr. Reynders said the European Central Bank had also committed to helping to unfreeze the commercial paper market, which companies use to finance day-to-day operations.

Leaders of the 15 countries that use the euro did not put a price tag on any of their promises — contrary to Britain, where Prime Minister Gordon Brown announced £150 billion, or $255 billion, in government funds and other measures, and the United States, where a $700 billion bailout plan will now partly be used to recapitalize banks.

European officials said actions would be taken at the national level, within the framework of the agreed “toolbox.” The idea, they said, was that governments face different challenges and needed to act quickly but that a common front would avoid the possibility that one country might undercut another.

Each country, Mr. Reynders said, will announce concrete figures for the measures they expect to take individually.

“There is no question of setting up a European fund,” he said.

Announcements last week by Britain and the United States that they would move to take ownership shares in ailing banks, the 15 leaders of the countries that use the euro found themselves looking for a collective response to avoid tit-for-tat actions by individual countries that might harm their neighbors.

European officials said actions would be taken at the national level, within the framework of the agreed “toolbox.”

Mr. Brown said earlier after meeting at the Elysée Palace with Mr. Sarkozy, that he believed Europe would “work together with America.” Mr. Brown, whose country has maintained its own currency, the pound, also warned that the decisions made Sunday would have economic consequences for years to come.

In contrast to the meeting last weekend, European leaders on Sunday seemed to be reading from the same script.

“Our goal is to have coordinated action for the euro zone,” Angela Merkel, the German chancellor, said, and the meeting “is a very important signal for the strength of the euro zone.”

Germany is considering a plan to inject 50 billion to 100 billion euros into its banks, with a price tag for all of the new measures reaching as much as 400 billion euros, or $536 billion, according to a person briefed on the government’s work. A German official cautioned that the numbers remained speculative.

Source: NYT

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