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PARIS - European leaders hoped to agree on a detailed plan in Paris yesterday to prevent market panic and stave off what the International Monetary Fund warned could be a global financial meltdown.
In Britain, banks were in crisis talks with the government and regulators which could see the government take multi-billion-pound stakes in several lenders.
Across the globe, Australia and New Zealand announced they would guarantee bank deposits.
The IMF said it backed a plan by the Group of Seven leading industrialised nations to stabilise markets. It said bold action was needed to persuade banks to resume lending and bring an end to a spreading credit crunch that has pushed global stocks to five-year lows.
"Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown," IMF chief Dominique Strauss-Kahn said.
In Washington, US president George Bush met G7 economic chiefs and officials from the IMF and World Bank on Friday and Saturday but they failed to agree on concrete measures to end the crisis.
"I'm confident that the world's major economies can overcome the challenges we face," Bush said, adding that Washington was working as fast as possible to implement a $700billion financial bail-out package.
Last week, the Standard & Poor's 500 index tumbled more than 18percent - its worst week on record - while European stocks plunged 22percent and Tokyo's Nikkei crashed 24percent.
Coordinated interest-rate cuts from central banks failed to soothe investors' nerves and credit markets remained logjammed. The scene shifted from Washington to Paris yesterday.
French economy minister Christine Lagarde said before leaving Washington the summit of euro zone leaders would go beyond talking about remedies to "put meat, muscles on the bones of that skeleton and to develop, follow up and execute upon it". French President Nicolas Sarkozy and German Chancellor Angela Merkel, meeting in France, said they had prepared a number of decisions to present to the meeting to try to restore normal flows in blocked credit markets.
The French cabinet next week will study a plan to give state guarantees to a body extending debt to the country's banks, a parliamentary official said.
Sarkozy will meet British prime minister Gordon Brown - whose country is not in the euro zone - European Central Bank president Jean-Claude Trichet and European Commission president Jose Manuel Barroso before the summit of euro zone leaders kicks off.
In an interview with Britain's Observer newspaper, Brown said he will try to broker a Europe-wide bail-out of banks modelled on Britain's intervention, saying the "stakes could not be higher" for jobs, mortgages and the future of the economy. - Reuters