(BRUSSELS) - EU leaders will flesh out emergency plans at a summit starting Wednesday for restoring confidence in shell-shocked banks after hastily arranging massive rescue packages to avert meltdown.

Desperate to contain the financial crisis, governments across Europe have pledged to unlock more than 1.7 trillion euros (2.3 billion dollars) to bring banks back from the brink of collapse.

Leaders from the 27-nation European Union, meeting Wednesday and Thursday in Brussels, are due to rally behind plans hammered out on Sunday among eurozone countries to tackle the crisis.

"This is and remains work in progress. We see light at the end of the tunnel but we are not yet there," European Commission chief Jose Manuel Barroso told journalists in Brussels Tuesday.

In emergency talks in Paris, leaders from the 15 countries sharing the euro, plus Britain, agreed to prop up the hardest-hit banks through cash injections and underwriting loans between financial players.

Until the Paris talks, Europe had struggled to convincingly coordinate its response to the financial crisis, which sapped confidence in the system all the more.

"To try to go it alone in this climate would be a fatal mistake for any government," said Barroso. "We have agreed on a toolbox that governments can choose to use or not to use."

While the recent pledges to support the banking system have done much to boost confidence, concerns remain among some EU countries that are not planning such drastic measures.

The Czech Republic's ambassador to the EU, Milena Vicenova, voiced concerns that guarantee measures in wealthier neighbouring EU countries could trigger a "flight of capital" out of her country.

"We have some concerns that there might be some spiral effects," she said, insisting that EU competition and state aid rules "have to be followed" in order to ensure a level playing field in Europe.

Although EU leaders will focus on how to survive the current storm engulfing the financial system, they will also be called on to reflect on what can be done to ensure it steers through, or averts, crises in the future.

"Once we have put financial markets back on their feet, we must ensure they function properly so that they serve citizens and business rather than themselves," Barroso said.

"There must be no more business as usual. We must rethink regulatory and supervision rules for financial markets including banks, ... hedge funds, and private equity," he added.

The European Commission has proposed better coordination of EU banking supervisors and is due to issue plans for regulating credit rating agencies later this month.

However, it has so far resisted calls for tougher regulation on hedge funds and private equity, insisting that the root cause of the current problems is in the banking system and not such investment firms.

At the request of EU nations, the commission is also due to publish plans on Wednesday that would ease accounting rules for how banks book the value of soured assets.

Rather than book the much depressed price of such assets, the changes would allow banks to record the historical cost they originally paid.

The move has been deemed necessary because the United States also recently adopted such a reform and Europe is concerned that its banks may be at a disadvantage to their US rivals if a similar measure is not adopted in Europe.

European Council

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