The European Union will raise its minimum bank deposit guarantee in a co-ordinated response to the global financial crisis, EU finance ministers announced Tuesday.

French Finance Minister Christine Lagarde speaks at a news conference Tuesday following an emergency meeting of EU finance ministers meeting in Luxembourg. (Yves Logghe/Associated Press)Following an emergency meeting in Luxembourg, the ministers of the 27-nation bloc released a joint statement that said they "all commit to take all necessary measures to enhance the soundness and stability of our banking system and to protect the deposits of individual savers."

The change will raise the minimum bank deposit guarantee to $68,160 US for one year.

The amount was selected because it will allow smaller and poorer EU nations to be able to afford the guarantee, but countries are also allowed to set their minimum higher.

Until the outbreak of the credit-crunch crisis, most EU governments had guaranteed consumer savings of up to $27,000 to $34,000.

The announcement is in line with a weekend announcement from Germany, France, Britain and Italy that the EU would act jointly to calm markets and is meant to assure consumers that their savings are safe.

The financial support should be temporary and governments should take care of taxpayers' money, the statement said.

"We are not going to tolerate a Lehman Brothers scenario," said French Finance Minister Christine Lagarde, who led the emergency talks, referring to the U.S. investment bank that went bankrupt, setting off a chain of losses at other institutions.

Ministers commit to daily contact

The finance ministers said they would stay in daily contact to discuss the crisis and "ensure a comprehensive and co-ordinated response to the current situation."

The approach will also bolster the national supervision of banks and other financial institutions — especially those that operate across several nations — and curb bonuses for departing chief executives.

The ministers' statement stressed that governments should be able to oust management and that executives of failed companies should not receive "undue benefits."

The seven agreed-to principles reached at the meeting include interventions into ailing financial institutions, protecting the interests of taxpayers and fair competition, and are meant to guide the European Union through the financial turmoil.

But the EU is hampered in taking unified action because while it boasts a single currency in 15 of its 27 member nations, it has no legal powers to intervene in financial markets.

Instead, European national governments have pumped billions of euros into ailing banks and organized takeovers.

Exchanges slipping

European exchanges in London, Paris and Frankfurt have been slipping into the red as investors worry governments are not doing enough to boost banks.

Charlie McCreevy, EU commissioner for internal market and services, left, talks to Italian Finance Minister Giulio Tremonti at the EU finance ministers meeting in Luxembourg on Tuesday. (Yves Logghe/Associated Press)Although Europe has tighter banking rules than the U.S., meaning fewer defaults on loans, European banks have invested heavily in American institutions.

Those investments are now effectively worthless, leaving some banks short of funds to meet demand.

Going into the emergency meeting, the EU countries had looked anything but united, said CBC London correspondent Ann McMillan.

Several EU countries had already made independent decisions to raise deposit guarantees and to take measures to combat the financial crisis.

"The European Union has been looking pretty disunited this past week with some countries like Ireland, Germany, Denmark promising bank savers 100 per cent guarantees on their money, and other countries like Britain putting limits on how much savers will get back if a bank goes into liquidation," McMillan said.

In the past 10 days Belgium, the Netherlands, France, Luxembourg, Sweden and Ireland have either provided large cash injections for ailing banks or provided credit guarantees worth scores of billions of euros.

Ireland has already shocked its partners and the European Commission by guaranteeing not just private savings but also banks' debts.

"We must restore confidence to the European banking sector," said Irish Finance Minister Brian Lenihan.

Guaranteeing deposits was not enough, Lenihan said, because interbank loans had also suffered from the crisis.

"There is not enough liquidity in the market. That's a problem we have to address. Ireland has taken an initiative but we're only a small country," he said.

Iceland nationalized its second-largest bank on Tuesday and the country's central bank received a Russian loan to bolster foreign exchange reserves.

UK to make announcement Wednesday

Britain's Finance Minister Alistair Darling and Bank of England Governor Mervyn King met with the heads of Britain's biggest banks to discuss possible government plans to inject as much as $87 billion into the institutions.

Following the meeting, a government source told Reuters that Darling will announce a rescue package for the U.K. banking system on Wednesday.

Darling confirmed in a televised statement that he intends to make a statement before markets open on Wednesday morning.

The current turmoil has also triggered controversial calls for the euro-zone to soften the economic criteria underpinning the euro, most notably the requirement that a nation's annual budget deficit cannot exceed three per cent of gross national product.

With files from the Associated Press