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European leaders agree on financial deal

(Agencies)
Updated: 2008-10-13 10:24

PARIS -- The leaders of 15 European nations agreed on Sunday to shore up troubled banks as part of a broad plan to ease the global financial crisis.

French President Nicolas Sarkozy said the plan would refinance banks, guarantee interbank lending and ensure that troubled banks do not fail. It also will protect individual depositors' accounts and ease some regulations to give banks more flexibility.

The refinancing of the banks and the guaranteeing of interbank loans are good until the end of 2009.

"What we want is to give back banks the means to lend, to support the economy to enable households to borrow for mortgages or consumption and give companies the means necessary to invest for growth," Sarkozy said. "We cannot have a healthy economy and sustainable growth unless we have a solid financial sector."

Sarkozy announced the agreement after a meeting of leaders of the Eurozone countries, which use the euro currency. Sarkozy also holds the rotating European Union presidency.

European officials say the plan is not a gift to bank management and that managers, who contributed to the crisis should be held responsible. The refinancing will be made at market rates and will consider the financial health of the banks.

Each country will take slightly different approaches, because they have different laws and banking regulations, but their actions will be compatible.

"We have a tool kit and we will see what suits whom in order to achieve what we are setting out to achieve, which is to make sure that we don't have an economic crisis in addition to the financial crisis. We need to get things moving again, shifting again. And when things have calmed down, we'll go back to our basic training and responsibilities," Sarkozy said.

The leaders wanted to work quickly to reassure investors before the markets open on Monday.

Sarkozy said France, Germany and Italy will hold Cabinet meetings on Monday and will announce concrete plans.

"These measures will be implemented in France without delay," Sarkozy said.

British Prime Minister Gordon Brown met with Sarkozy and other leaders before the summit and told reporters there was "common ground now about what needs to be done" to soothe the financial markets.

On Wednesday, officials from the Eurozone countries will present their plan to the rest of the European Union at a meeting in Brussels, Belgium. Sarkozy said that they would then urge the United States to hold an international summit to manage the crisis.

"The crisis didn't come from Europe. It began in the US It has now become a worldwide crisis, and the issue of European structural institutions may be put on the table at some stage, but right now, we're dealing an emergency. And we have to reform urgently an international financial system that needs to be reformed," he said.