Germany, France and Spain have announced multi-billion euro rescue schemes to shore up their banks.
Germany has approved a package worth up to 500bn euros (Ј393bn; $683bn), France will spend about 350bn euros and Spain has set aside 100bn euros.
The bulk of this money will be used to guarantee lending between banks - part of a plan agreed to this weekend by the 15 nations that use the euro.
France and Germany will also use the cash to take stakes in ailing banks.
Two-fold plan
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The moves cheered investors, with stock markets rising worldwide.
French President Nicolas Sarkozy said France would provide up to 40 billion euros to provide banks with the financing they needed via a public company in which the state would the only shareholder.
"This is a massive engagement," he said.
He added that no financial institution would be allowed to collapse.
Fund
Unlike France, Germany and Britain, Spain's Prime Minister Jose Luis Rodriguez Zapatero said that Spain did not need to take stakes in any banks because its banks were solvent.
However, last week the Spanish government announced the creation of a 30bn euro fund to buy assets from Spanish banks to help stabilise the lending industry and unfreeze credit.
At present banks are reluctant or unable to loan cash to fellow financial institutions due to fears about whether the money will be paid back.
It is this lending between banks that traditionally lubricates the banking system, freeing up cash for lending to private individuals and other firms.
(BBC)
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