UPDATE 2-Eurozone leaders mull EU-wide rescue package-source
(Adds details, background)
PARIS, Oct 11 (Reuters) - Leaders of the euro zone countries will discuss the possible creation of a bank rescue package which will take Britain's initiative as a reference when they meet on Sunday, a source close to the French presidency said. The 15 states that have adopted the euro EUR= currency will try and find a united response to the crisis in the meeting organised by France, holder of the rotating European Union presidency, before pummelled financial markets reopen on Monday.
"There are two competing models. The American model, which no one wishes to draw inspiration from, and the British model. This is what everyone is talking about," the source said, on condition of anonymity.
Hopes that concrete results may emerge from the first such gathering of Eurogroup leaders during the crisis were fuelled by French Economy Minister Christine Lagarde, who told French radio there would be new initiatives.
"The Eurogroup meeting will once again open new possibilities and perhaps yield some clarification," she told France Info radio in a pre-recorded interview from Washington, where she had attended meetings of the Group of Seven nations.
"I am sure there will be new proposals," she said, without elaborating.
Europe's response to a freeze in interbank lending and turmoil on financial markets has been patchy and improvised, with various governments rushing to put out fires in their own countries rather than work on a Europe-wide plan.
Analysts warned that well-meaning declarations would not suffice and that concrete action was now needed to stop the bleeding in financial markets, especially in the euro zone where, question marks over possible solutions remained.
"The Eurogroup meeting will therefore be essential," said Philippe Waechter, director of economic research at Natixis Asset Management. "Resorting to public funds is good but it offers no tangible solution for reducing the perception of risk ex ante," he wrote in a research note.
FOCUS ON EUROGROUP
French daily le Figaro cited a government source as saying that the 15 euro zone countries -- which do not include Britain -- could decide to massively recapitalise lenders and to guarantee bank debt.
Such a proposal could take Britain as a model, the paper cited its source as saying, after London committed 50 billion pounds to recapitalise its banks and offered to guarantee interbank lending by as much as 250 billion pounds.
German newspaper Die Welt reported on Friday that the government there was working on a British-style rescue plan for its financial sector which could involve guarantees of over 100 billion euros and a large capital injection.
A German Finance Ministry spokesman had said no decisions of this kind had been taken and that the government was observing the effectiveness of measures already taken. Continued...
