They put on a united front, promising a more coordinated approach to the credit crunch, although Germany's Chancellor Angela Merkel insisted states would mainly act individually.

President Nicolas Sarkozy, who hosted Merkel and prime ministers Gordon Brown of Britain and Silvio Berlusconi of Italy, did not dispute this point, but said a new "doctrine" had been agreed. He said the four had agreed to punish failing bank executives and to call for a rapid meeting of the Group of Eight world industrialised powers to marshall a global response to the financial crisis.

"Each government will operate with its own methods and means, but in a coordinated manner. In a way, we have devised a doctrine," Mr Sarkozy added.

Mr Brown said: "This crisis (…) has affected all businesses, so we agreed to ask the European Investment Bank to frontload 25 billion pounds (44 billion dollars) of finance for small business loans."

The German bank Hypo Real Estate (HRE) announced that a planned 35-billion-euro (48-billion-dollar) buy-out had collapsed.