EUROPEAN finance ministers were yesterday preparing their first joint measure to reassure savers unnerved by the financial crisis by ramping up minimum bank deposit guarantees.

Despite deep division about whether to mount a US-style rescue package for European banks, European Union leaders on Monday issued a joint declaration pledging to protect the stability of financial institutions by providing "liquidity support through central banks, action to deal with individual banks or enhanced depositor protection schemes".

Panic swept through the European financial sector on Monday with stockmarkets plunging amid growing concerns about the health of the banking system following a series of recent state bail-outs. Finance ministers of the 15 countries that share the euro met on Monday night to formulate a plan and ministers from all 27 EU member states were to meet yesterday to begin work on putting the pledge into action.

"We will all take the necessary measures to ensure the stability of the financial system," said Jean-Claude Juncker, who heads the group of finance ministers from the 15 countries that share the euro.

It comes as the Pope spoke on the global financial crisis for the first time, likening the astonishing collapse of some of the world's largest banks to "houses built on sand".

The apparent show of European unity came in the wake of suggestions that the actions of the German, Irish and Greek governments - among others - in announcing a blanket guarantee on savers' deposits had undermined the EU's pledge to act as one on the crisis. Iceland and Denmark became the latest countries to declare a deposit guarantee on Monday. It has put intense pressure on other European governments to follow suit.

Europe's finance ministers are also divided on whether Europe needs a US-style bail-out fund. The Spanish Finance Minister, Pedro Solbes, said the idea of a European fund "would be quite difficult" to implement "given the structure of the European Union", which does not have a big enough federal budget.

Agence France-Presse; Telegraph, London; Guardian News & Media