Europe backs US debt plan, but little interest in following suit

(BRUSSELS) - US plans to buy up the bank bad debt killing the credit markets won backing in Europe on Monday but there was little support to follow in Washington's footsteps this side of the Atlantic.

The US government announced a 700-billion-dollar plan late Sunday to relieve banks of the bad debts at the root of the crisis that has caused the collapse, takeover and rescue of several major US financial institutions.

"The announcement of the initiative was very positive but we need to know the details," EU Economic and Monetary Affairs Commissioner Joaquin Almunia told reporters during a visit to Bratislava.

"The initiatives of (US Treasury Secretary Henry) Paulson are welcomed, we all appreciate the positive impact of these initiatives," Almunia said.

As part of the proposal, Paulson called on other countries to come up with similar plans to help stabilise the global financial system.

"It is up to governments to consider if they can follow this initiative; the situation is not the same in Europe," Almunia said.

Germany ruled out any ambitious bailout plan on the grounds that the financial sector in the European economic heavyweight was sound enough not to need one.

"Measures like those in the United States are not necessary here," said a spokesman for German Chancellor Angela Merkel. "Germany has been much less affected" by the crisis.

French Finance Minister Christine Lagarde said that Paris' reaction was limited to restricting short selling, or speculating on sharp drops in stock prices with borrowed shares.

A number of European countries, including Britain, France, Germany and the Netherlands, adopted such share restrictions in the last week.

Of the European countries, Britain -- with its vast financial services sector based in global industry hub London -- has been more active to limit the fallout from the current crisis.

British Finance minister Alistair Darling said in Manchester, northern England, that Britain would introduce legislation to reform the banking sector in two weeks' time.

Darling said the bill would be about "strengthening the supervision of the banking system, making it easier to intervene if a bank gets into trouble (and) giving new powers to the regulators."

In a keynote address to the ruling Labour Party's annual conference, Darling said the government would also be giving new protection to savers and that he had asked the independent Financial Services Authority (FSA) regulator to "review urgently" how to improve the system.

Meanwhile, finance ministers and central bankers from the Group of Seven industrialized nations also gave their support to the US plan, saying in a statement that they will "take whatever actions may be necessary.

"We strongly welcome the extraordinary actions taken by the United States to enhance the stability of financial markets and address credit concerns, especially through its plan to implement a programme to remove illiquid assets that are destabilizing financial institutions," they said.