Spain today joined the call for an increase in the guarantee limit on bank deposits across Europe, piling further pressure on UK Prime Minister Gordon Brown to support an ambitious plan for a €300 billion (£237 billion) bailout fund to rescue crippled banks.
UK banks are pushing Mr Brown to act after Ireland's shock decision to guarantee domestic debt and deposits threatened to trigger a wave of Britons transferring their savings to Irish lenders.
French President Nicolas Sarkozy, whose country holds the European presidency, is seeking Mr Brown’s support before an emergency summit, scheduled tentatively for Saturday, with Silvio Berlusconi, the Italian Prime Minister, and Angela Merkel, the German Chancellor.
His proposal was greeted with scepticism in Britain and outright hostility in Germany. It appears to involve the creation of a Europe-wide emergency fund that would be used to prop up banks when national governments are unable to intervene.
Ms Merkel said that Germany could not and would not issue a blank cheque for all banks, “regardless of whether they behave in a responsible manner or not”.
Amid the confusion and bickering between governments, France denied at first that it had put forward a proposal for a fund at all and then, after admitting that it had done so, denied that it would cost €300 billion.
Paris said that the figure had come from the Dutch Government. Officials in The Hague said that they had no idea what the French were talking about.
The Financial Times posted this screenshot labeled "Cost of insuring French government debt from default" under the heading Le Bailout: