Finance ministers in the 15-nation euro zone vowed on Monday to protect all big banks from breaking down in the finance crisis.
"We have agreed that no financial institution of systemic importance should be allowed to fail," said Luxembourg Prime Minister Jean-Claude Juncker, who heads the group of finance ministers from the 15 countries that share the euro.
"We will all take the necessary measures to ensure the stability of the financial system," he told reporters after a meeting with his euro zone colleagues.
The financial crisis, which originated in the United States, has deepened in Europe in the most recent weeks, with several European banks falling prey to the global credit crunch, prompting EU governments to save their banks by injecting large amount of money or even nationalizing them.
In a bid to calm savers' concern about their money in the banks, several EU countries raced to increase their guarantee of private bank deposits.
But all those emergency measures have failed to contain the crisis so far. Panic swept through the European financial sector earlier Monday as stock exchanges in Paris, London and Berlin all registered massive falls.
European Central Bank (ECB) President Jean-Claude Trichet, who also participated in the ministers' meeting, tried to assure investors by saying the market currently may be over-estimating banks problems.
"I think it is fair to say that we may have reached a stage where the pendulum may have swung too much the other way," Trichet said.
Trichet said the ECB is prepared to inject as much liquidity as needed into the money markets. "We will continue to provide money markets with all the liquidity they need for as long as necessary," he said.
Earlier Monday, leaders of all the 27 EU member states issued a joint statement vowing to defend banks.
"All the leaders of the EU declare that each of them will take whatever measures necessary to ensure the stability of the financial system, whether by injecting liquidity from central banks, by measures targeted at certain banks or by enhanced measures to protect deposits," said the statement.
The leaders said they will continue to take the necessary measures to protect the depositors, acknowledging the need for close coordination and cooperation.
Ireland was the first country in the EU to guarantee all bank deposits in response to the financial crisis. The unilateral move angered Britain, which feared depositors may withdraw money from British to Irish banks.
Despite a pledge to coordinate at a weekend summit in Paris, Germany followed Ireland Sunday in deciding to guarantee all private bank accounts, putting pressure on Britain and other countries to do the same.
Spanish Finance Minister Pedro Solbes said Monday that the European Commission would propose a sharp increase in the minimum bank deposit guarantees at a meeting of EU finance ministers also here on Tuesday.
Currently EU law requires member states to guarantee savers' deposits of at least 20,000 euros in case of a bank failure.
(Xinhua News Agency October 7, 2008)
