Brussels calls for concerted EU response to financial crisis

(LUXEMBOURG) - The EU commission on Monday called on member states to better coordinate their responses to the spiralling financial crisis.

"We should have a common approach, coordinated action, to avoid unilateral decisions that create negative spillovers," EU monetary affairs commissioner Joaquin Almunia told journalists as he arrived for a meeting of eurozone finance ministers in Luxembourg.

"We should give confidence to individual depositors in our banks, try to improve the situation in the interbank markets, easing tensions for the banks that are solvent," Almunia added, amid almost daily announcements of bank bailouts by member states acting individually or in clutches.

Despite repeated declarations of intent on concerted Europe-wide action, the member states have largely been taking care of their own national interests, with no common strategy notably on the hot topic of bank deposit guarantees.

The German government on Sunday announced an unlimited guarantee for all private bank deposits in a bid to prevent a panic run on banks in Europe's biggest economy.

That unilateral decision followed a similar move by Ireland to guarantee deposits in six major Irish banks, an initiative which German Chancellor Merkel had criticised.

Britain responded to Berlin's emergency measure by saying it understood that Germany did not plan to pass legislation to back up its promise.

British Prime Minister Gordon Brown was to speak to Merkel by telephone later Monday, the spokesman said.

Britain fears such measures will siphon money out of its banks and into rivals with stronger guarantees.

Austria has also been pressured to follow the German initiative so as to avoid a capital outflow from its banks.

Almunia said he knew nothing about reports of an Italian move to relaunch the idea of a common safeguard plan for European banks along the US model.

US President George W. Bush on Friday enacted a 700-billion-dollar financial sector bailout plan to underpin the country's financial institutions

Italian Prime Minister Silvio Berlusconi said that Rome would resurrect the idea of creating a European bank bailout fund at the Luxembourg meeting of EU finance ministers.

While the idea of creating a European fund along the lines of the 700-billion-dollar US bailout package failed to gain traction at a weekend mini-summit leaders of European leaders in Paris, Berlusconi said minds had changed.

On Saturday in Paris "Angela Merkel couldn't accept" the proposal "because she didn't have the power. Today, on the contrary, she said she agreed. France will do the same," Berlusconi was quoted as saying by the ANSA news agency on Sunday.