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Only state intervention can save us now, says Merkel

BERLIN - Only the state can restore trust to financial markets now, German Chancellor Angela Merkel was quoted as saying Sunday amid reports that Berlin was about to unveil a huge rescue package for its banks.

‘Only action by the state is capable of restoring the necessary trust,’ Merkel was quoted as saying by the Bild am Sonntag weekly following talks on Saturday in France with President Nicolas Sarkozy.

‘In this it is important that countries do not act unilaterally but that we we coordinate at European and international level and then implement the measures within our national responsibilities,’ Merkel said.

Her comments came as the clock ticked down for leaders from the 15 nations of the eurozone and Britain to hammer out at a meeting in Paris a coordinated financial rescue package before markets open on Monday morning.

No details have yet been released, but there were signs that the 15 were leaning towards the policy already adopted in Britain under which the state guarantees inter-bank lending and buys stakes in banks.

In Germany, Europe's biggest economy, press reports said that following the meeting in Paris the German government would announce a rescue package worth several hundred billion euros for its banks.

Berlin is expected to guarantee interbank loans with between 300 and 400 billion euros (405-540 billion dollars) and to provide banks with fresh capital in exchange for shares in the banks, similar to the partial nationalisation plan announced in Britain last week, the reports said.