Europe leaders to unveil half-trillion-euro bank rescue

Europe leaders to unveil half-trillion-euro bank rescue
BERLIN (AFP) - Governments in Berlin, Paris and Rome were Monday to announce more than half a trillion euros in rescue funds for Europe's stumbling banking sector, as each puts a price tag on a joint bail-out plan.
Leaders of the 15-country eurozone single currency bloc, following the lead of Europe's financial giant Britain, agreed Sunday on a high-stakes joint bid to pull the world financial system back from the brink of collapse.
Stock markets in London, Paris, Amsterdam, Milan and Frankfurt, reeling from their blackest week since the crash of 1929, rebounded sharply even before full details of the rescue were unveiled, soaring by more than 5.0 percent.
Meeting in Paris, the leaders agreed to plough funds into struggling banks and guarantee inter-bank lending, which all but dried up in the panicked four weeks since the collapse of US bank Lehman Brothers, threatening the health of the wider economy.
No global price tag was announced for the enterprise -- modelled on a similar scheme adopted by London last week -- but the German package alone was set to reach 470 billion euros (640 billion dollars), government sources said.
In Berlin, Chancellor Angela Merkel's cabinet was to meet and at 3:00pm (1300 GMT) announce the rescue, set to include around 70 billion euros in fresh capital and 400 billion euros in loan guarantees, according to officials.
In France, whose major banks have so far pulled through the crisis relatively unscathed, President Nicolas Sarkozy will address the nation at 3:00 pm (1300 GMT), after an emergency cabinet meeting.
At the same time in Austria, the government was to announce a bail-out, which Chancellor Alfred Gusenbauer has said could involve part-nationalisation of the worst-hit banks.
Portugal has already offered a 20-billion-euro guarantee for endangered banks, while Italy's cabinet was to meet Monday to "update" bail-out measures already taken.
All 15 eurozone members are to release full details before a summit Wednesday of the 27 European Union members in Brussels, where more non-euro-spending states are expected to sign on.
The European plan, coming two days after the Group of Seven richest economies pledged similar action to shore up the financial sector, won plaudits from International Monetary Fund (IMF) chief Dominique Strauss-Kahn.
"Guarantees have been given, there is complete political determination," he told French radio Europe 1. "There is no reason today, for either depositors, market actors or businesses to have anything to fear."
Strauss-Kahn said the plan "should provide the elements to reassure, in a situation that is highly irrational," reaffirming the need for "massive," "global and coordinated" action.
The head of the eurogroup, Luxembourg prime minister Jean-Claude Juncker, said the bail-out was "essential" to prevent a global financial meltdown.
"This is not about handing out gifts to bankers," he told RTL radio. "The banks we help will have to pay. This is about ensuring that consumers and investors can keep on functioning in a rational way."
"If we just stand back and do nothing, everything will collapse."
European leaders took example from a 500-billion-pound (630-billion-euro, 850-billion-dollar) British rescue plan.
London on Monday ploughed 37 billion pounds into a trio of banks, Royal Bank of Scotland, HBOS and Lloyds TSB, the first to benefit from the scheme.
And European central banks moved to free up frozen lending by providing commercial banks with unlimited amounts of dollars in a joint operation that might be reinforced by Japan.
The Bank of England, European Central Bank and Swiss National Bank will loan dollars to commercial banks for periods of seven, 28 and 84 days "at fixed interest rates for full allotment," an ECB statement said.
Banks worldwide need dollars to finance operations, but the market on which they would normally borrow them has seized up following the collapse in the US subprime mortgage market.
The European Union also said it was ready to help Hungary's government after its currency, the forint, slumped last week.


So much $
The Package:
Bristain: Total 500 b pound (630 b euro/850 b dollars)
200 b pound (short term)250 b pound ( guarantee loan between bannks)
Germany
70 b euros (fresh capital)400 b euros (loan guarantee)
France

Austria
Portugal 20 b euro (guarantee)