EUROPEAN PLAN:EU LEADERS are struggling to agree a co-ordinated plan of action to tackle the financial crisis ahead of an emergency summit of the big four countries in Paris tomorrow.

The possibility of setting up a joint €300 billion fund to cover potential bank failures at a pan-European level - an idea that was first mooted by France and the Netherlands - was dismissed by German finance minister Peer Steinbrück.

"To put it mildly, Germany is highly cautious about such grand designs for Europe," he told reporters yesterday.

ECB president Jean-Claude Trichet also said a US-style rescue fund would not work. "We are in Europe in a framework which is not a political federation. We do not have a federal budget, so the idea that we could do the same as what is done on the other side of the Atlantic doesn't fit with the political structure of Europe," said Mr Trichet, who will attend the summit along with the leaders of France, Italy, Germany, Britain and the prime minister of Luxembourg, Jean-Claude Junker, who is chairman of the Eurogroup.

When the strength of German opposition to the idea of a cross-border bailout fund was articulated, French president Nicolas Sarkozy quickly dropped the idea. But Mr Sarkozy and European Commission president José Manuel Barroso are pushing member states hard to agree to co-ordinate their efforts more closely to tackle the financial crisis.

The banking industry also wants a united EU response, and some of its senior executives pressed Mr Barroso on this point at an informal dinner in Brussels last night.

"No one can solve this problem on their own because the banking sector is so interconnected across Europe," Guido Ravoet, secretary general of the European Bankers Federation told The Irish Times.

"If the financial crisis deepens then it will have serious repercussions for companies, households and consumers. We think the confidence of investors and depositors would be enhanced if there is a more co-ordinated EU approach."

One idea that may be aired at the meeting on Saturday, and which could prove politically tenable, is for member states to agree to set up a national reserve fund worth about 3 per cent of their gross domestic product.

This cash could be set aside to deal with national banking emergencies if they occurred, said one EU official, who dismissed the prospect of big member states agreeing to replicate the Irish State guarantee scheme across the EU.

French finance minister Christine Lagarde joined the European Commission and Britain in criticising the way the Irish State guarantee scheme was introduced. She noted that: "A measure decided in one member state has to be shared in advance with other member states."

She added: "When something happens in one member state it affects everybody else around, so there needs to be that level of cross-sharing of information."

But smaller EU states, which are not invited to the mini-summit on Saturday, may break ranks and follow the Irish example if the financial crisis worsens.

Last night a senior finance ministry official in Greece said it was about to offer a similar guarantee scheme.

"The government will guarantee all bank deposits, whatever the amount," he said.

In the absence of the political will necessary to agree to a pan-European bail fund, EU officials are likely to focus the debate tomorrow on introducing new regulation.

There is growing support for easing the EU accounting rules, known as mark-to-market. These rules require banks to price their assets frequently at current market values, a rule that some critics blame for requiring unnecessarily huge writedowns. The US is also expected to revise these rules, although some fear this may only reduce the visibility of losses.

The summit is also likely to focus on amending an existing EU directive that forces member states to guarantee bank deposits at a minimum of €20,000.

Officials believe a higher limit should be introduced, a move that could remove the patchwork of different deposit guarantee schemes that exist across Europe. This could help to create a more level playing field for banks and depositors operating in different EU states.