MercoPress. South Atlantic News Agency

Europe agrees on “flexible” targets but no US bail-out plan

A Paris sunny fall message of smiles and hope from the 'big' four

Europe's biggest economies agreed on Saturday to work together to support financial institutions, but without forming a joint bail-out fund. French President Nicolas Sarkozy hosted the meeting of the leaders of Britain, Germany and Italy in Paris.

They agreed to seek a relaxation of the EU rules governing the amount of money individual states could borrow. Mr Sarkozy announced a series of other measures - including unspecified action against the executives of failed banks. Speaking after the meeting at a joint news conference, he said the four had agreed that the leaders of a financial institution that had to be rescued should be "sanctioned". Mr Sarkozy added: "Each government will operate with its own methods and means, but in a co-ordinated manner." He suggested the EU budget rules - requiring nations using the Euro common currency to keep their budget deficits below 3% and overall public debt below 60% of gross domestic product - would be adapted to deal with financial crisis, reflecting the current "exceptional circumstances". European Commission President Jose Manuel Barroso - who also attended the summit along with European Central Bank chief Jean-Claude Trichet and the chairman of the Euro zone group of finance ministers, Jean-Claude Juncker - agreed that the budget rules would be applied with "flexibility". The leaders also issued a joint call for a G8 summit "as soon as possible" to review the rules governing financial markets. UK Prime Minister Gordon Brown said governments would continue to take measures to ease the credit shortage. "The message to families and to businesses is that, as our central banks are already doing, liquidity will be assured in order to preserve confidence and stability," he told reporters after the mini-summit. He said European leaders should send the message that "no sound, solvent bank should be allowed to fail through lack of liquidity". German Chancellor Angela Merkel - who said she was not happy with Ireland's action in guaranteeing bank deposits - said each country must act in "a balanced way" that did not cause harm to other EU member states. "Each country must take its responsibilities at a national level," she said. The summit coincided with the announcement by German mortgage lender Hypo Real Estate that a planned 35 billion Euro rescue deal had fallen apart after the banking consortium involved pulled out. Hypo did not give reasons for the plan's collapse but said it would seek to stay in business through "alternative measures". The head of the International Monetary Fund (IMF), Dominique Strauss-Kahn, had earlier urged the EU to take co-ordinated action, saying the financial crisis was presenting Europe with a "trial by fire". He held talks with Mr Sarkozy before the EU leaders' meeting and said that although the EU was a more complex organization than the US, Europe needed to take "concerted collective action". He said: "It has to be indicated to the markets... that European countries will not react as every man for himself." He also said he would be scaling back his world economic growth forecasts. Ahead of the meeting, Germany had made clear its opposition to any co-ordinated European bail-out plan. Mr Brown was also skeptical of the need for any Europe-wide plan. The president of the European Parliament has criticized the summit, warning that the leaders of Europe's four largest economies have no power to decide for the entire European Union. Calls for European action follow the bail-out of both Bradford and Bingley in the UK and Fortis Bank by the governments of Belgium, Luxembourg and the Netherlands.