WASHINGTON, Oct 2, 2008 (AFP) - Fresh shocks from the global financial crisis rattled markets Friday as the US Congress debated a new 700 billion dollar bank bailout.

Wells Fargo stepped in to buy US bank Wachovia which had been due to merge with a rival institution, central banks again spent heavily to stabilise markets and major European bank UBS announced big job cuts to offset losses.

The House of Representatives was to vote on the new bailout plan on Friday but world leaders say it will take more than that to rescue the international financial system and save the global economy from a painful recession.

'In America ... as in Europe and the rest of the world, we have to face up to the major correction that is underway,' European Central Bank chief Jean-Claude Trichet said on French radio.

Questioned whether the US rescue plan would pull the United States out of trouble, he replied: 'We cannot say that after such and such an action, it is all over.'

US President George W. Bush launched an impassioned appeal to the House to follow the Senate's lead and approve the rescue package, warning that 'people's jobs are in jeopardy.

'This issue has gone way beyond New York and Wall Street. This is an issue that is affecting hard-working people,' Bush said in his 14th appeal in a fortnight for lawmakers to back the controversial proposal.

In the hours leading up to the vote, Wells Fargo said it was buying Wachovia, the fourth biggest US bank in terms of assets, for 15.1 billion dollars in stock, ending a government-backed plan for Citigroup to take over Wachovia's banking operations.

Wells Fargo and Wachovia 'signed a definitive agreement for the merger of the two companies' without government assistance, the two firms said in a statement. No reason was given for the end of talks with Citigroup.

The acquisition will cost Wells Fargo some 10 billion dollars in integration expenses and the San Francisco-based bank will issue up to 20 billion dollars in securities to bolster its capital position.

Swiss banking giant UBS, which was at the centre of massive market attention over its future, said it would cut 2,000 more jobs as it revamps its battered investment bank unit. The lay-offs would bring staff levels in the unit to about 17,000, 6,000 less than the peak level in 2007.

UBS has been forced to write down over 42.5 billion dollars' worth of assets since the US mortgage market soured last year.

The leaders of Britain, France, Germany and Italy -- Europe's major economies -- were to meet Saturday in Paris to discuss the crisis.

The build up has already revealed splits on how to protect the banking sector, with Germany dismissing calls for a joint European fund to bail out failing banks.

The Dutch government has proposed that EU governments reserve a sum equivalent to three percent of gross domestic product to help ailing banks and money markets. The measure could create a pool of more than 350 billion euros.

South Korea's President Lee Myung-Bak also called Friday for a meeting between his finance minister and those of China and Japan to discuss closer coordination against the turmoil.

The European Central Bank made available another 50 billion dollars (36 billion euros) in short-term funds in what has become a regular effort to keep cash flowing on distressed interbank money markets.

The Bank of Japan said it injected 800 billion yen (7.6 billion dollars) into the financial system in the 13th straight day of attempts to keep cash flowing while stock markets suffered another day of losses.

Most Asian bourses fell sharply. Tokyo closed down two percent, Hong Kong dived 2.9 percent and Sydney shed 1.4 percent.

In European trade, London added 0.06 percent, while Paris gained 0.07 percent and Frankfurt rose 0.44 percent ahead of the US vote.

The House of Representatives will vote on an amended version of the bailout plan, complete with 150 billion dollars in tax breaks to coax reluctant lawmakers from both the Democratic and the Republican parties to get on board.

The rescue bill, like an earlier one rejected by the House, gives the US Treasury power to buy up toxic mortgage debt which has been choking the financial industry.

It would essentially create a 700-billion dollar federal program to buy bad assets from banks and other financial firms at a steep discount.

Backers of the legislation hope the federal government will eventually be able to recoup most or all of the money by selling the assets later.

To make the bill more attractive, the Senate raised the ceiling on federal insurance for bank deposits from 100,000 dollars to 250,000 dollars, and added up to 150 billion dollars in tax break extensions for middle class families and business.

They also retained limits on 'golden parachute' severance payments to disgraced Wall Street executives, a key demand of those who had voted down the plan on Monday.