ANALYSTS VIEW: Analyst reaction to European bank plan

(Reuters) - Top European leaders holding an emergency meeting on the global financial crisis in Paris on Sunday rushed to craft a credible response before fearful world markets reopen, pledging to pump public money into banks.

According to a document circulated during the summit, two key things agreed by leaders were the commitments to provide capital and insure or directly buy into new debt issues.

Following are some economists' comments on the meeting:

ANALYST REACTION:

MARCO ANNUNZIATA, UNICREDITGROUP, LONDON

"EU policy-makers in Paris have risen to the challenge, and stolen the limelight from the G7 in Washington. They delivered a joint statement detailing concrete steps that will be debated in individual government meetings tomorrow in France, Germany, Italy and possibly other countries. The aim is to have most measures in place by the end of the week, including where legislative action is required."

"The measures address the key issues of recapitalization, liquidity and funding. Key steps include guaranteeing new medium-term bank debt and a suspension or weakening of mark to market."

"This announcement of concrete, decisive and well-targeted measures to be deployed simultaneously by individual governments should reassure markets. I see two risks: (1) there might be some disappointment on the lack of a guarantee on interbank lending -- some confusion on this in the press conference -- but markets should realize that funding and recapitalization will eliminate counterparty risk; (2) there will be some fear of "accidents" at cabinet meetings, after the precedent of the initial rejection of the TARP in the US."

"But overall what we have seen tonight is impressive, and deserves at the very least the benefit of the doubt -- after much hesitancy, European policy-makers are now racing ahead of the U.S. in their efforts to solve the crisis. The necessary degree of coordination has been agreed, and the actions will now come from (where) the real power lies, the national governments. In the coming week we should see some meaningful narrowing in Euribor-EONIA spreads, some strengthening of the EUR, and a less suicidal mood in equities."

PETER KENNY, MANAGING DIRECTOR, KNIGHT EQUITY MARKETS,

JERSEY CITY, NEW JERSEY

"You will see a reasonable market reaction to long-sought government intervention into markets. The nature of their problems are so enormous that there is only one backstop that can really deliver market calm and take the panic nature out of the sell-off, and that is the central banks working in a coordinated fashion.

"They're stepping up to the plate with all their fire power. It is literally a financial, economic call to arms.

"It is not going to be overnight but it is going to help a lot. It is going to take the edge of panic off market psychology.

"I think you may be able to find a rally in some of the more financial-intensive sectors."

JOHN MCCARTHY, VICE PRESIDENT OF FOREIGN EXCHANGE, ING

CAPITAL MARKETS, NEW YORK.

"It's got to be a bit of a confidence-builder, but we are going to have to wait and see how the equity markets take this."

"At some point in time there has to be evidence that banks are lending again."

"There has to be action on the private side after all these public measures."

KATHY LIEN, HEAD OF CURRENCY RESEARCH, GFT FOREX, NEW

YORK:

"This is a step in the right direction. Banking guarantees are nothing new, similar measures were already taken by some European governments. But this should help stabilize European markets next week."

"Even though these measures are not as strong as people expected, and the G7 statement was actually pretty tame, it seems central banks and the finance leaders are finally beginning to move in a coordinated manner. The sharp drop in (stocks) we've seen in the past week may bring back some bargain hunters. This may be good for U.S. stocks and good for carry trades. Bottom line, it may be positive for the dollar versus the yen and it may help the euro a bit."

THOMAS STOLPER, CURRENCY STRATEGIST, GOLDMAN SACHS,

LONDON:

"It looks pretty similar to what the UK announced, but we don't know the exact details yet. What's interesting is that Sarkozy spoke about preferred shares, governments taking stakes in banks through preferred shares."

"The coordination issue is clear. It was quite impressive. What they came out with tonight, that's fine. They've made great progress, All this is very impressive, no doubt about it. The only issue is how they recapitalize the banks. Will the governments be running the banks or not? It's a big difference whether you act with the management of the banks or not.

"We haven't got the exact details yet and we really have to see what the national governments say. The fact that Britain seems to be moving ahead in terms of buying ordinary shares in the banks and the Europeans only wanting to take up preferred shares ... might be seen as insufficient."

JOE PRENDERGAST, CURRENCY STRATEGIST, CREDIT SUISSE,

ZURICH

"The G7 declaration was really short on detail and the very general nature of what they said is likely to be disappointing to markets. But it's likely there was an agreement that each of the main players provides those nuts and bolts and the comprehensive and detailed nature of the EU draft looks quite good and very promising. How quickly they can now enact these is now important -- and it's crucial they act as one across the board on these, without anyone dragging their feet. That is the only way it can really work.

"In many respects, Europe is the most exposed to the cross-border aspect of this whole crisis. The banks are exposed to bad U.S. dollar debts, not euros, and they can't simply print money to get out of this. If they were to reflate to get out of this, any ensuing euro weakness against the dollar just exaggerates their position.