By Patrick Donahue and Francois de Beaupuy
Oct. 11 (Bloomberg) -- The leaders of France and Germany renewed calls for joint action by European governments to tackle the financial crisis, saying the 15 nations that share the euro will set up a ``toolbox'' of measures to respond to the turmoil.
President Nicolas Sarkozy and German Chancellor Angela Merkel, meeting today at the Charles de Gaulle memorial in Colombey-les-Deux-Eglises in eastern France, said a coordinated solution was necessary to calm European markets.
``Germany and France are united in that we need an agreed upon, coherent reaction in the euro-zone to the international financial crisis,'' Merkel told reporters. She called yesterday's statement from the Group of Seven most industrialized countries vowing to prevent failures by vital banks a ``starting point.''
Leaders of the nation's sharing the euro will meet in Paris tomorrow to discuss joint plans, after which each country will unveil its own measures. Merkel and Sarkozy said the region-wide strategy won't involve a European fund for banks, rather, as the German leader said, ``implementing the same toolbox of instruments.''
Merkel said Germany will unveil its strategy to assist banks tomorrow evening and declined to rule out the possibility of the government purchasing stakes in banks.
While the details have yet to be worked out, the German plan involves ``providing banks with sufficient capital so that they are able to operate on their own -- and I don't rule out that there could be capital support,'' Merkel said.
Recapitalizing Banks
The government may provide up to 100 billion euros ($134 billion) to recapitalize private banks, state banks and insurance companies, Handelsblatt reported today, citing unidentified officials involved in the negotiations.
``It's not nationalization in the sense that the state for a long period of time interferes with a bank, but rather state aid so that a bank has the ability to operate,'' Merkel said.
The European plan may mirror the U.K.'s decision this past week to inject 50 billion pounds ($85 billion) into banks, France's Le Figaro reported today. The 15 European heads of state and government might agree to ``massively recapitalize'' their banks and guarantee debts, it said.
Sarkozy declined to comment on details of the plan. He said he'll meet with U.K. Prime Minister Gordon Brown in Paris tomorrow ahead of the gathering of euro-region leaders.
``We've prepared a certain number of decisions which we will submit to our partners'' tomorrow, Sarkozy said.
French Finance Minister Christine Lagarde said leaders in Paris would discuss a U.K. proposal to backstop loans between banks, a measure G-7 officials shied away from copying.
``There will certainly be a debate because it's a very heavy technical measure,'' she told journalists in Washington today.
The German and French leaders were in Colombey-les-Deux- Eglises to commemorate the 50th anniversary of the 1958 meeting there of President de Gaulle and Chancellor Konrad Adenauer.
To contact the reporter on this story: Francois de Beaupuy in Colombey-les-Deux-Eglises at fdebeaupuy@bloomberg.net; Patrick Donahue in Colombey-les-Deux-Eglises at pdonahue1@bloomberg.net
Last Updated: October 11, 2008 18:50 EDT
