PARIS - THE head of the International Monetary Fund (IMF) urged European nations yesterday to adopt a coordinated approach to dealing with the financial crisis instead of each going its own way.

IMF chief Dominique Strauss-Kahn's call came just hours before the leaders of Europe's four largest economies - Germany, France, Britain and Italy - met to coordinate their response, at a summit here.

'What counts above all is coordination and the will not to act each for himself as we have seen a little bit in some European cases,' he told reporters.

The summit follows approval last Friday by the United States Congress of a US$700 billion (S$1 trillion) bank bailout plan to tackle a crisis sparked by a housing market collapse and a surge in bad mortgage debt.

Mr Strauss-Kahn said the complexity of the European Union made it even more important to have a coordinated message.

'I hope that Sarkozy will come out with a message to the Europeans, a message of concerted collective action which is even more necessary in Europe than in the United States because Europe is a more complex construction,' he said after a meeting with French President Nicolas Sarkozy, the host of the summit.

The fallout from the crisis has redrawn the banking landscape on both sides of the Atlantic, paralysed wholesale money markets and caused huge volatility on stock markets.

Beyond offering reassuring words, the summit is expected to focus on whether governments across the European Union should raise bank deposit protection levels to restore confidence, and may demand that financial executives cut big payoffs which are not linked to performance.

However, signs of division showed before the talks.

Germany repeated its opposition to using taxpayer funds to help ailing banks and Finland complained that the meeting did not extend to all members of the EU.

Ireland has also annoyed some other European countries by promising to guarantee all bank deposits, a move which prompted some depositors in Britain to move their savings to branches of Irish banks.

Reported suggestions of a collective EU bank rescue fund of 300 billion euros (S$600 billion) were leaked to media earlier in the week but squashed rapidly after strong objections from Germany and Britain.

Germany stepped up its opposition to any European rescue fund yesterday.

'I do not think it can be justified in this situation to ask the state to restore trust that has been gambled away with large-scale debt relief plans financed by tax money,' Economy Minister Michael Glos told the Bild am Sonntag newspaper.

Before the summit, British Prime Minister Gordon Brown urged Europe to aid small businesses through a £12 billion (S$31 billion) fund from the European Investment Bank (EIB).

The EIB has said the money would be spread over two years, but Mr Brown wants the funds made available immediately.

- Reuters, AFP