European leaders vow to fight financial crisis

By Anna Willard and Brian Love

PARIS (Reuters) - European leaders vowed after crisis talks on Saturday to do all they could to fend off the financial mayhem that has snowballed out of Wall Street and is now hitting banks in Europe.

As they did so, German property lender Hypo Real Estate said it was "fighting for survival" after a government-backed rescue unraveled, and Belgium was seeking a buyer for what remained of beleaguered bank and insurance group Fortis after the rest was nationalized by the Dutch government.

"We jointly commit to ensure the soundness and stability of our banking and financial system and will take all the necessary measures to achieve this objective," the leaders of France, Germany, Britain and Italy said in a statement.

For a text of the statement please click on

The statement, after talks of about three hours, was more a declaration of principle and call for coordination of national responses than an announcement of instant new measures to deal with the worst financial crisis since the 1930s.

They urged the European Commission to produce legislative proposals in the near future on bank deposit insurance in the European Union and urged immediate establishment of cross-border supervisory colleges to improve cross-border surveillance.

French President Nicolas Sarkozy, who called the emergency meeting, said governments needed to act in a coordinated manner.

But he said he had never gone as far as to propose a pan-European rescue fund for banks -- something Berlin had balked at when talk of it surfaced a few days ago.

"We have taken a solemn undertaking as heads of states and government to support the banks and financial institutions in the face of this crisis," he told a news conference flanked by the other leaders.

DEFICIT PLEAS

The leaders' statement explicitly referred to the fact that EU rules which impose limits on national deficits also allowed for exceptional circumstances to be taken into account in their application, and that such circumstances now existed.

That recognized in theory that any government which runs up a larger deficit because of money plowed into bank rescues, or maybe just because of economic downturn itself, could plead for a waiver from the EU deficit limits.

German Chancellor Angela Merkel, keen not to become bankroller-in-chief as governments seek a joint response to the crisis, said those who caused the trouble must help fix it.

Sarkozy arranged the Paris summit in the hope that a show of unity would help restore confidence in the banking sector and an economy on the brink of recession across the developed world.

In Washington, a White House spokesman said: