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BERLIN - European governments launched a multi-pronged attack on the finance crisis Monday, approving more than a trillion dollars in loans and providing a shot in the arm to ailing world financial markets.
Governments across the continent, rattled by the relentless downward spiral of shares, unveiled rescue packages after agreeing at a weekend summit to guarantee interbank lending and make state funds available to buy bank stocks.
The package announced by Germany alone included 400 billion euros in loan guarantees and 80 billion euros in fresh capital, while France said it would guarantee up to 320 billion euros of lending between banks.
And in Washington, US President George W Bush also vowed to pursue "responsible, decisive action to restore credit and stability and return to vigorous growth" as he met visiting Italian Prime Minister Silvio Berlusconi.
Stock markets, which had largely failed to rally after the US government announced a 700 billion dollar bank bailout plan last month, rose strongly amid the string of announcements which also included details from Britain on its part-nationalisation of several leading banks.
Meanwhile Neel Kashkari, the US Treasury's pointman on the massive bailout, said Washington was ready to buy equity in a "broad array" of financial institutions.
"We are designing a standardised program to purchase equity in a broad array of financial institutions," Kashkari said.
Announcing details of the German package, Chancellor Angela Merkel said the measures being taken would only work if they were accompanied by improved international regulation that will end "market excesses."
"Today's measures are the first element of a new financial market charter ... but it can only be worthy of the name if it is followed by a second element, namely a change in international rules," she said after her cabinet approved the package.
French President Nicolas Sarkozy, who hosted a weekend summit for leaders of the 15-nation single currency eurozone, announced a 360-billion-euro rescue plan to pump capital into banks and underwrite loans between them.
France would guarantee up to 320 billion euros of interbank loans taken out until December 2009, and set aside up to 40 billion euros to recapitalise French banks, Sarkozy said.
"Money is not circulating anymore. We have to create the conditions to get it moving again," he said.
"The greatest danger is not to take risks, it is to do nothing."
And in Madrid, Prime Minister Jose Luis Rodriguez Zapatero announced that the Spanish government would set aside a maximum of 100 billion euros to cover similar loans.
Leaders from the 15 eurozone nations agreed the outline of the measures at an emergency summit in Paris on Sunday.
In addition to setting up funds to buy into banks, the model foresees money being set aside to guarantee interbank lending and free up credit markets that have been left reeling by the US subprime mortgage crisis.
European stock markets, which last week plunged by more than a fifth in their worst period since the 1929 crash, reacted positively.
In midday trade, Frankfurt's stock market was up a robust 6.15 per cent and Paris rose 6.36 per cent. London climbed 4.84 per cent, Madrid rallied 6.85 per cent and Zurich rocketed 7.63 per cent.
"We have had our first significant bounce in the markets for some time now," City Index market strategist Joshua Raymond said in London.
Wall Street shares jumped at the market opening Monday, with the Dow up more than four per cent.
Asian stocks also posted heavy gains after a week of big losses, with Hong Kong up more than 10 per cent. Tokyo, Asia's largest stock market, was shut for a public holiday after slumping 24 per cent last week.
Markets across the globe have been in a state of panic since the middle of last month when the venerable Wall Street investment bank Lehman Brothers filed for bankruptcy protection after the US government refused to bail it out.
Banks and other financial institutions across the world have been hit by bad debts stemming from the granting of so-called sub-prime loans to house-buyers in the United States who subsequently defaulted.
- AFP/ir
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