European leaders vowed at the start of an emergency summit today to do what they could to fend off a financial crisis that snowballed out of Wall Street and is now hitting banks in Europe.
German Chancellor Angela Merkel, keen not to be turned into bankroller-in-chief as governments seek a joint response to the worst crisis since the 1930s, said those who caused the trouble must be made to help sort it out.
"The politicians have to take responsibility in this very difficult situation, but those who have caused the damage must contribute to the solution," she told reporters as she entered the summit at French President Nicolas Sarkozy's Elysee Palace.
Mr Sarkozy invited the heads of government of Germany, Britain and Italy to a meeting that he hopes will restore confidence to the banking sector and an economy on the brink of recession in much of the developed world.
"I want the message to go out of this meeting today that no sound, sovereign bank should be allowed to fail for lack of liquidity," British Prime minister Gordon Brown said on arrival.
"The signal will be very clear that every country represented here today will want to do whatever is necessary to secure the stability of the system and to ensure the safety of their hardworking families and businesses in each of our countries," he added.
The summit follows approval yesterday by the US Congress of a $700-billion bank bailout plan to tackle a crisis sparked by a housing market collapse and a surge in bad mortgage debt.
"My administration will move as quickly as possible, but the benefits of this package will not all be felt immediately," US President George W. Bush said in a radio address.
The fall-out from the crisis has redrawn the banking landscape on both sides of the Atlantic, paralysed wholesale money markets and caused huge volatility on stock markets.
Underlying the problems facing banks, the governments of Belgium and Luxembourg scrambled to find a buyer for the remains of troubled financial group Fortis on Saturday after the Netherlands nationalised most of its Dutch units.
The break-up of the cross-border banking and insurance group, came less than a week after a first rescue attempt in which the three governments injected €11.2 billion into the company.
Luxembourg's economy minister said French bank BNP Paribas was one possible bidder for parts of Fortis and a solution had to be found by the end of the weekend.
Beyond offering reassuring words, the summit is expected to focus on whether governments across the European Union should raise bank deposit protection levels to restore confidence, and may demand that financial executives cut big pay-offs which are not linked to performance.
This follows the Irish Government's move to provide an unlimited guarantee. But Germany's reservations about funding rescues are not the sole hurdle to European co-operation.
The four countries represented by Ms Merkel, Mr Brown, Mr Sarkozy and Italian Prime Minister Silvio Berlusconi at the Paris summit are the four largest in Europe and also members of the G7 and G8 clubs of major industrial powers.
European Central Bank President Jean-Claude Trichet and Jean-Claude Juncker, chairman and spokesman for the finance ministers of the euro currency zone, also attended, as did European Commission President Jose Manuel Barroso.
The $700 billion bail-out approved by the U.S. Congress is earmarked to buy up assets that turned toxic when the US housing market and sub-prime mortgage market collapsed.
Stocks, which had been higher before the vote, dropped, with the S&P 500 index closing at its lowest level in almost four years as investors focused on signs of a gathering recession.
Reported suggestions of a collective EU bank rescue fund of €300 billion were leaked to media earlier in the week but squashed rapidly after strong objections from Germany and Britain.
Ms Merkel has previously said she will sign no blank cheque.
Berlin has spent billions of euros helping two banks on its own patch but may fear that any attempt to create a pan-European rescue fund would force it to bankroll rescues to an excessive extent in other countries of Europe.