Sarkozy Leads Calls for More Joint EU Action

Sarkozy told reporters he had spoken to Brown on Wednesday but gave no details of their conversation.

Britain urged Europe to follow its lead in guaranteeing inter-bank lending on Wednesday in concerted action to combat the global financial crisis after criticism that Europe's response has been slow and fragmented.

Simultaneous interest rate cuts by six central banks, including the European Central Bank, failed to revive world stock markets that have plunged on fears of a global recession.

But French President Nicolas Sarkozy, whose country holds the European Union presidency, said such a unified response would boost the economy and the EU was also discussing joint action.

"What is very important is that everyone understands that coordinated action has more chance of success. Little by little this coordination is being set in place," Sarkozy told reporters after attending an international seminar in southeast France.

"France and the European Presidency are working on this global, coordinated response and in the hours ahead we will have concrete results," he said minutes after the central banks announced the rate cuts.

British Prime Minister Gordon Brown announced a plan to inject as much as 50 billion pounds ($88 billion) to bolster the balance sheets of national banks and suggested a Europe-wide scheme to help the moribund financial sector.

Brown also wrote to G7 and European Union leaders, urging concerted action to guarantee inter-bank lending through "a set of national guarantees to a broadly similar design" to restore trust in the global market for bank funding.

"We're putting this morning to all our European colleagues a proposal for (a) European funding scheme," he said.

A British government source said the proposal was "more on the issue of guarantees. It's about guarantees of the sort we put in place here for interbank lending".

PROTECTING DEPOSITORS

The financial crisis originated in the United States and European governments initially ruled out the prospect that it might cross the Atlantic.

When EU banks started to stumble last month, leaders struggled to find a cohesive response and were split over measures to protect individual national depositors.

French, British, German and Italian leaders failed at the weekend to come up with concrete measures to match the $700 billion bailout plan adopted by the United States last week.

But EU finance ministers promised on Tuesday to raise the minimum level of bank deposit insurance across the 27-nation bloc and ensure the banking system's stability. Further measures and pledges of concerted action followed on Wednesday.

Sarkozy told reporters he had spoken to Brown on Wednesday but gave no details of their conversation.

In Brussels, European Commission President Jose Manuel Barroso told the European Parliament: "Today I am encouraged by the determination of member states to work together... To be frank, I am not yet satisfied, we can and we must do more."

He welcomed the British measures, which he said were in line with the principles adopted by EU finance ministers.

Barroso said former International Monetary Fund chief Jacques de Larosiere would head a high-level panel to advise the EU on long-term responses to the global financial crisis.

European markets crashed at the start of the week amid fears the authorities were powerless to stop the rot, which prompted a fresh round of calls for more effective EU action.

"There can be no isolated response to the global challenges," Sarkozy told Wednesday's conference, which was also attended by Russian President Dmitry Medvedev.

The French leader has long pushed for an ECB rate cut to stimulate the sickly European economy. The bank's announcement that it was slicing its prime rate by 50 basis points to 3.75 percent was widely applauded.

"This decision will contribute to a stabilisation of the situation on financial markets," said German Economy Minister Michael Glos. "Given the unusual turmoil that we have seen in recent days, this was the right step."