Eurozone leaders to meet for financial crisis summit

The summit of heads of state and government will also bring together European Commission chief Jose Manuel Barroso and Jean-Claude Trichet, president of the European Central Bank, according to a statement by the French presidency issued Friday.

"The meeting's objective will be to define a joint action plan for the eurozone and the European Central Bank in relation to the current financial crisis," the statement said.

It is scheduled for 1700 GMT at the Elysee Palace in the French capital, it said. The Eurogroup includes the 15 countries that share the euro.

Despite repeated pledges to coordinate their action, EU governments have often gone their own ways so far in tackling the crisis at the national level.

Sunday's gathering comes ahead of a European Union summit planned for Brussels on Wednesday and Thursday, with leaders eager not to turn up with their hands empty in the midst of the worst banking crisis in generations.

With talks underway between the European Union's French presidency, the main member states and the European Commission, a senior commission official said: "We need to decide on more concrete action."

"With the stock market drop that we're seing, nobody wants to leave it at that. Everyone is aware that something else is needed," another source close to the discussions said.

Germany was quick to torpedo the idea of a joint European fund to help struggling banks, which the Netherlands floated and the French supported.

Ireland irritated its EU partners by launching sweeping plans to guarantee most of the liabilities of its biggest banks, including savings deposits.

This week Britain offered not only to partially nationalise troubled banks but also to guarantee their borrowings from each other so that liquidity in the banking system does not entirely dry up.

Negotiations underway among countries are focused on whether to follow Britain's example more widely across the EU, especially by extending state guarantees on interbank lending throughout the bloc.

However, even if the EU cannot reach an agreement on doing that then "we can do it at least in the eurozone," the senior commission official said.

A French diplomat confirmed that "we're looking at the British plan" although nothing has so far been decided.

Much will depend on the outcome of weekend meetings in Washington, especially a gathering of finance ministers from the Group of Seven most powerful countries.

In its current state, the British plan creates problems because it gives an advantage to Britain's vast banking sector through the state guarantee on interbank borrowing.

The European Commission, which is responsible for ensuring a fair playing field in Europe, is going to have a close look at the plan, according to a European diplomat.

Talks ahead of the EU summit next week are also focused on how to improve the regulation of markets.

EU foreign ministers will meet in Luxembourg on Monday to prepare the summit.

The EU member states have already agreed to review accounting rules that are forcing European banks to write down the value of risk assets to currently rock-bottom prices.

They are concerned that the rules as they stand now put European banks at a disadvantage compared to their US counterparts following a recent easing of similar rules in the United States.

However, EU countries have failed to agree on more harmonisation of oversight of the banking sector at the bloc level even though the current crisis has put regulators in the hotseat.

Many member states are reluctant to handover regulatory powers to a centralised European authority.