PARIS, Oct 12: European leaders raced against the clock on Sunday to craft a rescue strategy for banks hit by the worst financial crisis since the 1930s, focusing on pledges to recapitalise banks or buy debt they issue.

According to a draft statement circulated at their summit in Paris, the leaders from the euro currency area were working on a 14-point plan of which two key ingredients were the commitments to provide capital and insure or directly buy into debt issues.

“Governments remain committed to avoid any failure of systematically relevant institutions, through appropriate means, including recapitalisation,” said the draft statement.

French President Nicolas Sarkozy told reporters the meeting would come up with an “ambitious and coordinated plan” to tackle the crisis, which spread from the United States more than a year ago but has hit fever pitch in recent weeks.

Officials suggested action rather than rhetoric could emerge from a gathering that involved the leaders of Britain and the 15 countries of the euro currency zone as well as European Central Bank President Jean-Claude Trichet.

“If market confidence is not restored this weekend, it’s game over,” said Marco Annunziata, chief economist for UniCredit, an Italian bank which is among many whose shares have been hurt in panic-stricken stock markets.

Money markets, less visible to the public, are essentially on life support and dependent on regular, massive injections of emergency liquidity from central banks across the globe because banks themselves will not lend to each other as they used to.

British Prime Minister Gordon Brown, whose country has not adopted the euro currency, was invited to Paris because the euro zone wanted possibly to replicate something like the rescue plan announced in London last week.

Brown, present for the first part of the meetings only, told a news conference before leaving the Elysee presidential palace: “I believe that we will see over a few days worldwide action that will make people see that confidence in the banking system can be restored.”

Britain’s rescue plan makes available $86 billion of taxpayers’ money for injection into its banks and, crucially, calls for underwriting interbank lending.

At another crisis summit in Paris a week ago, German leader Angela Merkel rejected the idea of a collective European rescue fund for banks and Sarkozy said he had not proposed one.

That would not preclude governments on Sunday saying they were ready to pay up even if they do not put all the money in one pot or surrender control of what they offer.

The draft statement mentioned no figures, however.

Sarkozy said he would announce some specific French measures for the domestic banking sector on Monday, and Berlin made similar noises about Germany.

In addition to Brown and the leaders of the euro currency countries, the summit was attended by Trichet, European Commission President Jose Manuel Barroso and Jean-Claude Juncker, Luxembourg prime minister and chief spokesman for euro zone finance ministers.

The talks there were to determine how much capital each bank needs from the $86 billion offered by Britain on Wednesday, said the source, who declined to be identified.—Reuters