The EU executive is proposing "coordinated action" to the 27 European Union nations to recapitalise banks, European Commission president Jose Manuel Barroso said today.
"We are now proposing to the member states to have a coordinated action to recapitalise banks and get rid of toxic assets they may have," Barroso said in a television interview.
The statement came after France and Belgium this week agreed to bail out Dexia, the first European bank to be dragged down by the euro zone debt crisis - and which also had to be rescued in 2008.
The debt crisis, beginning in Greece, has snared Ireland and Portugal and put Italy and Spain in the firing line too, threatening to sink the whole euro project as banks exposed to their debt find it impossible to raise funding.
The resulting "credit crunch" has sparked warnings that there could be a replay of 2008 when US giant investment bank Lehman Brothers collapsed, nearly taking the global financial system with it but for massive government support.
German Chancellor Angela Merkel yesterday called on her EU partners to recapitalise the banking sector to help prevent the euro zone debt crisis spreading.
Merkel said helping the banks was "justified, if we have a joint approach", giving nervous financial markets an immediate boost after days of heavy losses on fears the banking sector needs help urgently.
It "is important for the markets that we achieve results - time is pressing and we have to act quickly," she said.
