LUXEMBOURG, Oct 7, 2008 (AFP) - European finance ministers were on Tuesday to unveil an emergency action plan to protect savers a day after the financial crisis saw a nosedive on global markets amid widespread investor panic.

In a first joint, concrete measure to restore confidence in the banking system, the ministers were considering ramping up the minimum level of bank deposit guarantees in Europe to as much as 100,000 euros (136,000).

'We must restore confidence at a European level to the banking system,' said Irish Finance Minister Brian Lenihan as he arrived for the talks in Luxembourg, confirming that a 100,000-euro limit was 'under examination.'

In a joint declaration on Tuesday, EU nations pledged to protect the stability of financial system with 'liquidity support through central banks, action to deal with individual banks or enhanced depositor protection schemes.'

A coordinated European response to the crisis has been slow in coming despite the leaders of Britain, France, German and Italy meeting over the weekend, with Berlin opposing a proposal to create a European-wide bank rescue fund.

In the absence of EU-wide action, a growing number of European countries have rushed to raise their minimum guarantee on bank deposits in hope of boosting confidence.

Currently EU law requires member states to guarantee savers' deposits to at least 20,000 euros in case a bank goes bust, although some states have long offered much higher protection.

After Germany offered a blanket guarantee on bank deposits on Sunday, Austria, Britain, Denmark, France, Portugal, Spain and Sweden indicated they had similar plans in the works.

Ireland triggered the rush last week with a law offering an unlimited guarantee on all deposits at its biggest banks.

However, Ireland has come under fire from its EU partners for the move because it covers a wide range of bank operations at its six biggest banks, raising fears they could have an unfair advantage over rivals from other countries.

It also raised concerns that it could encourage people to flock to Ireland to park cash in Irish accounts, causing deposits to flow out of banks elsewhere in Europe.

'One country's solution is the other country's problem. We really have to push for a common solution,' said Swedish Finance Minister Anders Borg.

In a meeting with Lenihan on Monday, EU Competition Commissioner Neelie Kroes asked Ireland to take measures over 'distortions in financial flows.'

Meanwhile, economists at investment bank UBS raised doubts over such ambitious guarantee schemes.

'The guaranty is not credible per se: if a run on bank was to happen the governments would not be able to fully guaranty the deposits,' economists at investment bank UBS said in a research note.

'The guaranty will be efficient only to the extent that it is self-fulfilling: because there is a state guaranty, there is no reason for a run on bank, hence the state guaranty is not needed/used,' they added.