French, German Leaders Leaning Toward UK-Style Plan

French President Nicolas Sarkozy and German Chancellor Angela Merkel paved the way on Saturday for European measures to tackle the global financial crisis but revealed little about their plans.

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Sarkozy, whose country holds the rotating six-month presidency of the European Union, has called an emergency meeting on Sunday of the 15 countries that have the euro as their currency, with a view to taking steps to stop the rot.

"We have prepared a certain number of decisions that we will submit to our partners in the presence of the president of the European Commission and the governor of the (European) central bank. You understand that it is not appropriate for us to talk about it," Sarkozy told a joint news conference with Merkel.

While the leaders would not provide details, they vowed to act in a coordinated manner, but ruled out an EU-wide bank rescue fund, an idea which EU officials say France originally floated but has since been scrapped in the face of opposition from Germany and others.

"We know where we want to get to and how we want to get there, but first we want to coordinate between the euro zone countries and then all of Europe," Sarkozy said, adding that he would meet British Prime Minister Gordon Brown before the Eurogroup meeting on Sunday afternoon.

A source close to the French presidency said the euro zone leaders would discuss the possible creation of a bank rescue package which will take Britain's initiative as a reference.

"There are two competing models. The American model, which no one wishes to draw inspiration from, and the British model. This is what everyone is talking about," the source said, on condition of anonymity.

Britain's rescue plan, launched last week, involved injecting 50 billion pounds ($86 billion) of taxpayers' money into its banks and, crucially, to underwrite interbank lending which has all but frozen around the globe.

Merkel Promises Clarity

Germany is considering its own British-style package that would offer the finance industry interbank guarantees worth "triple digit" billions, according to various German media.

Merkel said Germany may inject capital into its banks but it was not planning to take permanent stakes in them.

"This is about providing the banks with sufficient capital. I don't rule out that there will be capital injections," she said after meeting Sarkozy in postwar president Charles de Gaulle's home village in eastern France.

Merkel stressed, however, that the state was not looking to intervene in the banks on a permanent basis.

"There will be clarity on Monday," she said.

Media reports said Germany's rescue package could be adopted as early as Monday using accelerated legal proceedings. German business daily Handelsblatt said one expert in the ruling coalition had estimated the package was worth around 300-400 billion euros and that injection of equity capital worth up to 100 billion euros was also under consideration.

Sarkozy has proposed that the leaders of countries in the Group of Eight (G8) and some emerging market nations meet this year to overhaul the international financial system, and he said he was confident it would take place.

"The Chancellor and I have observed a very positive evolution in the position of the United States on the opportunity for a summit," he said.

The Group of Seven (G7) club of rich nations vowed on Friday to take all necessary steps to unfreeze credit markets and ensure banks can raise money but they offered no collective course of action to avert a deep global recession.

Merkel said the decisions taken at a G7 meeting in Washington this weekend would help take initiatives in Europe.

"I'm convinced that the decisions being made in the G7 will provide a good basis for the things we are going to discuss tomorrow," she said.

"We can't provide any details yet today, but we will have a foundation from the G7 for the euro zone, towards a collective, coherent international reaction."

The French president emphasised Franco-German unity after their spat over the idea of an EU-wide fund.

"Once again Germany and France stand side by side, aware of our responsibilities, and rest assured of our will to make sure there is total coordination," Sarkozy said, adding that France and Germany would aim to implement decisions at the same time.

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