Brown scores victory in EU battle over bailout blueprint

Gordon Brown scored a victory last night when European leaders backed his blueprint for stemming global financial turmoil.

After a week of chaos on the markets, the eurozone countries endorsed radical plans to guarantee interbank lending and inject capital into major institutions at risk of failure.

The prime minister praised the measures – which are based on a £500billion UK bank rescue package that he announced last week – as the best way of restoring “confidence” to the shattered international system.

The International Monetary Fund also expressed hope that the situation would be stabilised by the EU move, which comes after the United States signed up to a similar approach.

The promise of action from the 15 eurozone countries came after an emergency summit in Paris.

In a break with precedent, Mr Brown attended despite the UK not being part of the single currency, and he took the opportunity to push his vision for co-ordinated global action.

A meeting between the prime minister and his French, German and Italian counterparts last weekend failed to agree on a joint course of action. But another disastrous spell on global stock markets appeared to have overridden reservations.

A communique from the eurozone group stated that they would guarantee “for an interim period and on appropriate commercial terms” lending between banks.

The scheme will be “limited in amount”, and individual nations will decide the level of their support. The loan length will be up to five years.

The French press lavished praise on Mr Brown as a “magician”, and described the action as based on the “British model”.

But, speaking to reporters after the summit, Mr Brown played down his role.

“No one country can solve a global problem on its own,” he said.

“We are working together in Europe and across the Atlantic and around the world.”

He went on: “The difficulty that we have got at the moment is in restoring confidence in the banking system. What is missing is confidence itself. I believe that the action we have taken in Britain will restore that, and we will see over the next few days worldwide action that will also see confidence restored.”

Mr Brown said it was vital now to reshape the international financial system to make it “fit for purpose” in a completely different global economy.

The announcement of the UK bailout package last week failed to stop further dives on stock markets.

But Mr Brown insisted the important thing was securing the “foundations” of the system.

“There will be day-to-day movements on stock markets,” he said.

“The question is, are we making sure the foundations of our banking system are in the best possible order?