Euro zone countries pledge billions to banks

London/Brussels: European countries pledged billions more euros to support ailing banks but failed to reverse mounting gloom yesterday, with a UK politician calling for nationalisation of two top lenders and Barclays shares sinking.

Belgium is planning a second round of help for banks, but the plan didn't restore confidence and shares in KBC tumbled by more than a third.

Spain lent its banks 4 billion euros (Dh19.01 billion) yesterday, accepting mortgage-backed debt as security against a series of two-year loans in an attempt to kickstart lending to businesses and consumers.

France and Germany also offered more help, but the prospect that more dramatic intervention will be needed as economies tip into recession tugged the European banks index to a 16-year-low.

"There's a complete lack of buyers because of the absence of confidence on balance sheets and a lack of confidence on the macroeconomic environment," said Arturo de Frias, analyst at Dresdner Kleinwort. "On top of that there's an increasing concern about nationalisation."

British banks are at the heart of the worry. Barclays crashed 21 per cent to 57.4 pence and Lloyds Banking Group lost 14 per cent at 38.5 pence (Dh1.93) amid concern it and Royal Bank of Scotland could need more state help or be fully nationalised.

The chairman of the British parliament's Treasury Committee urged the government to nationalise RBS and Lloyds as the global financial crisis deepens.

Barclays has avoided selling the government an equity stake, but analysts said it would be next in line if its rivals go into state hands.