MercoPress. South Atlantic News Agency

Sarkozy denies bail out plan, but EU can't agree on B plan

French President Nicolas Sarkozy

French President Nicolas Sarkozy distanced himself from a proposed 300 billion Euro European Union-wide bank rescue scheme that has divided EU governments on the eve of a meeting to be held in Paris.

"I deny the sum and the principle of the rescue scheme" said Mr Sarkozy as other EU leaders lined up to criticize the apparently French idea of a bail-out fund which had been floated earlier in the week. The Netherlands said on Thursday it was seeking support among EU countries for a coordinated plan worth up to 300 billion Euros to prop banks. "Earlier this week a French plan was leaked that seemed similar to what we have been discussing in Europe" Dutch Finance Minister Wouter Bos told the Dutch parliament. But Germany said it opposes the proposal of a "rescue package" to help smaller European countries as had been suggested by French Prime Minister Christine Lagarde in an interview with a German newspaper. "Germany opposes the proposal based on its current assessment of risk" said Finance Ministry spokesman Stefan Olbermann. "We see no need for a fund". He added that the "idea of applying one solution, one big bang" should the banking crisis spread "is not practicable and would create new, enormous problems'' he told reporters in Berlin. "The tailor-made solution is the right way". Sarkozy is hoping to forge a common front at the Paris summit with his German, British and Italian counterparts on Friday. The summit is likely to focus on efforts to tighten regulation of ratings agencies and to improve co-ordination between supervisors, and a review of mark-to-market accounting rules. But France's partners were privately skeptical about Friday's meeting, forecasting little would emerge, and fearing bold but ill-considered proposals. A possibly face-saving initiative could be to agree common standards for deposit insurance. EU officials believe harmonizing protection for savers would discourage other states from following Ireland and offering blanket guarantees to banks. Greece became the latest EU country to propose more protection for savers. Jean-Claude Trichet, president of the European Central Bank, said the EU structure ill-suited a common bail-out scheme. So far fallout from the financial crisis has led Germany, France, Belgium, Luxembourg, Iceland and the UK to rescue banks and Italy's Prime Minister Silvio Berlusconi to pledge he would prevent losses for depositors.