By Sandrine Rastello and Paris
THE credit crunch deepened in Europe as government leaders pledged to bail out troubled banks and protect depositors.
BNP Paribas will take control of Fortis' units in Belgium and Luxembourg after government efforts to ensure the company's stability failed, while Germany's Hypo Real Estate has been handed a 50 billion ($A89 billion) lifeline. Britain's Chancellor of the Exchequer, Alistair Darling, said Britain was "ready to do whatever it takes" to help its banks.
The developments followed a summit in Paris where leaders of Europe's four biggest economies stopped short of a plan mirroring the US's $US700 billion ($A905 billion) rescue to counter the worst financial crisis since World War II. Instead, they agreed to work together to limit the economic fallout, ease accounting rules, and seek tougher financial regulations.
"Until now, the solutions have appeared to be unco-ordinated, so perhaps it's time for a more co-ordinated approach globally," said Torsten Slok, an economist at Deutsche Bank in New York. "It's not just the US and Europe, it's banks in every part of the world."
The euro slid to a 13-month low against the US dollar and Treasury bonds rose as the credit crisis spread outside the US, prompting investors to opt for less risky investments. Asian stocks fell for a third day, led by financial companies.
French President Nicolas Sarkozy called for a global summit "as soon as possible" to implement "a real and complete reform of the international financial system". He said "all actors" must be supervised, including credit-rating firms and hedge funds. Executive-pay systems must also be reviewed, he said.
"We want a new world to come out of this," President Sarkozy said. "We want to set up the basis for a capitalism of entrepreneurs, not speculators."
Finance ministers from the Group of Seven industrialised nations will meet in Washington later this week.
German Chancellor Angela Merkel's opposition to collective action underscored the hurdles to a European front. "Each country must take its responsibilities at a national level," she said after the summit.
Germany will guarantee the savings of private account holders in a bid by Europe's biggest economy to prevent a rush of withdrawals.
Denmark said commercial lenders would provide as much as 35 billion kroner ($A8.3 billion) over the next two years to a fund to insure depositors.
The German and Danish governments' commitments follow pledges by President Sarkozy and Italian Prime Minister Silvio Berlusconi, who promised to prevent losses for depositors in their countries. Ireland is guaranteeing banks' deposits and debts for two years, to restore confidence.
Amid the race to shore up Europe's faltering financial institutions, BNP Paribas, France's biggest lender, agreed to pay 14.5 billion for control of Fortis' units in Belgium and Luxembourg.
The sale comes after a bail-out late last month failed to stabilise what was Belgium's biggest financial-services provider, as clients withdrew money and the company had trouble obtaining loans. Fortis received an 11.2 billion capital injection from Belgium, the Netherlands and Luxembourg.
The Belgian Government will have an 11.6% stake in BNP Paribas, and Luxembourg a 1.1% holding, after the purchases are completed.
The Dutch Government took control of Fortis' units in the Netherlands on Friday for 16.8 billion after deciding the initial rescue did not go far enough.
In Britain, Chancellor Darling said the Government, which took over Bradford & Bingley last week, was ready to offer further support to banks that might get into financial difficulty. He did not rule out a further injection of capital for failing institutions.
"We are ready to do whatever it takes, and that is, we've put money in to help banks generally," he said. "There are other measures we will be taking too, and I will announce them when we are ready to do that."
BLOOMBERG