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Eurozone heads announce financial rescue plans

12/10/2008

The leaders of the 15 eurozone countries have agreed moves to safeguard their citizens from the financial crisis.

French president Nicolas Sarkozy said 15 European countries have agreed to guarantee interbank loans following a summit in Paris.

Portugal's finance minister had earlier announced a €20 billion euro ($27 billion; £16 billion) state guarantee for banks while Norway promised £40 billion of government bonds to stablise markets. .

The UK did not take part in the meeting of eurozone ministers - having not adopted the single European currency - but prime minister Gordon Brown has been invited by French president Nicolas Sarkozy to attend part of the summit, Downing Street confirmed.

And speaking after today's summit, Mr Brown told reporters he was confident he has convinced his European counterparts that bank bail-outs similar to that employed in Britain can help stem global financial turmoil.

"I am confident after talking to my European colleagues that more liquidity, funding for the medium term loans necessary for businesses and mortgages and the recapitalisation of banks are part of their thinking as well," he said.

"The difficulty that we have got at the moment is in restoring confidence in the banking system. What is missing is confidence itself.

"I believe that the action we have taken in Britain will restore that, and we will see over the next few days worldwide action that will also see confidence restored."

The eurozone meeting took place after the head of the International Monetary Fund (IMF) warned that the global financial system was "on the brink of systemic meltdown".

"Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink," said Dominique Strauss-Kahn.

He later told a news conference: "The first co-ordination between advanced countries and the rest of the world is now on track."

The financial ministers of the G7 group of leading industrialised nations agreed a five-point plan to tackle a potential worldwide recession on Saturday while the G20 - which includes Brazil, Russia, India and China - has assembled for an emergency meeting.

Members said they "committed to using all the economic and financial tools to assure the stability and well functioning of financial markets," following their meeting in Washington.