No regional bailout plan in Europe

Leaders of the European Union’s four major powers pledged Saturday to work in concert to keep their banks afloat but did not offer any major solutions for containing the growing financial crisis.

Reflecting the difficulty of getting EU member states to act in unison, a hastily convened mini-summit failed to produce a regionwide bank bailout plan on the lines of the $700-billion package approved Friday by the U.S. Congress.

Instead, the leaders of Britain, France, Germany and Italy agreed only on smaller steps to try to rein in the banking industry, such as increased supervision of credit-rating firms and hedge funds.

Each country would be responsible for shoring up its own banks, the four nations said, promising to act “in a coordinated manner.” The group also called for a global meeting to confront the financial crisis.

Governments across Europe intervened to save five banks last week. But in a sign of the daunting challenge ahead, one of those deals, a bid to rescue one of Germany’s biggest property lenders, Hypo Real Estate, collapsed Saturday when jittery commercial banks withdrew their support.

The emergency summit among Europe’s “Big Four” was an attempt to allay some of the fears sweeping across the continent, fears held by financial institutions and individual investors alike.

“This is a trial by fire,” said Dominique Strauss-Kahn, managing director of the International Monetary Fund, who met with French President Nicolas Sarkozy at the presidential Elysee Palace, before the summit. “Europe . . . needs to show it is capable of responding in a crisis.”

But the three-hour meeting highlighted the divisions that bedevil the EU, which comprises 27 member countries with just about as many competing agendas.

France, for example, last week pressed for a regional bailout similar to the one that passed in Washington, but had to back off when Germany demurred. Ireland infuriated many fellow EU states when it announced that it would guarantee all its bank deposits, which prompted depositors in other countries, particularly Britain, to flee their banks and open accounts with Irish institutions.

The leaders who met Saturday -- Sarkozy, British Prime Minister Gordon Brown, German Chancellor Angela Merkel and Italian Prime Minister Silvio Berlusconi -- tried to downplay those differences.

Besides their call for stronger regulation of hedge funds and credit-rating firms, the four leaders promised to crack down on executive pay and to release $41.5 billion in loans by the European Investment Bank to small and medium-sized companies struggling to find credit.

“A global problem needs a global solution,” the French president said. “Europe needs to demonstrate its will to find an answer.”

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henry.chu@latimes.com

Chu reported from London and Sicakyuz from Paris.