PARIS, Oct 12, 2008 (AFP) - Fifteen European leaders closed in Sunday on a joint strategy to end the haemorrhaging of market confidence by underwriting inter-bank loans and safeguarding financial institutions from collapse.

In a bid to prevent further meltdown when markets resume trading on Monday, French President Nicolas Sarkozy sought to persuade the 15 member states of the eurozone single-currency bloc to approve a 14-point joint action plan.

After urging his peers gathered in Paris to speak 'with one voice,' Sarkozy presented a draft statement, whose most eye-catching pledge was to guarantee new medium-term loans between private banks in a bid to kick-start lending.

This offer would stand for an 'interim period' and would see governments underwriting new loans of up to five years 'on appropriate commercial terms' by a variety of means, including issuing securities.

As the leaders discussed the draft, Belgian Finance Minister Didier Reynders briefed reporters that the eurozone countries should have until Wednesday to decide how much each will set aside.

'What we need now is for each country to fix the sum that it wants to put aside. This should happen by Wednesday,' Reynders said on the sidelines.

On Wednesday, all 27 European Union leaders will meet in Brussels.

The leaders were also expected also commit themselves to preventing any bank collapse and would step in to recapitalise failing institutions.

'We confirm today our commitment to act together in a decisive and comprehensive way in order to restore confidence and proper functioning of the financial system,' according to a copy of the draft statement seen by AFP.

'Governments remain committed to avoid any failure of systemically relevant institutions, through appropriate means including recapitalisation.'

Before joining his 14 eurozone colleagues, Sarkozy held bilateral talks with Prime Minister Gordon Brown of Britain -- which does not use the euro currency -- to talk about his plans to partially nationalise some of Britain's banks.

After briefing the other leaders, Brown said he expected confidence to be restored to the markets in a matter of days.

'I believe that in the next few days confidence in the banking system will be restored,' Brown told reporters. 'The decisions we take over the next few days will affect us for the years ahead.'

Financial markets across the world suffered massive losses throughout last week when all efforts to restore confidence appeared to fail.

Brown believes that confidence can only be restored if governments follow his lead in providing funds to not only prop up individual banks, but to free up loans between institutions that keep capital markets moving.

Brown's government has set aside 250 billion pounds (315 billion euros) to guarantee this trade, in addition to 200 billion pounds in short-term loans and 50 billion to buy stakes in major banks.

Upon entering the talks, German Chancellor Angela Merkel said the summit would send a 'very important signal' to calm down the markets.

Sarkozy confirmed there would be an emergency cabinet meeting on Monday to examine a plan to guarantee interbank loans, followed by an address by the president to the nation in which he would 'announce a number of measures.'

Lawmakers said a law on guaranteeing French banks would go before parliament this week.

And in Germany, Europe's biggest economy, press reports said that Merkel's government would announce after the summit a rescue package worth several hundred billion euros for its banks.

Berlin is expected to guarantee interbank loans with between 300 and 400 billion euros (405 to 540 billion dollars) and to provide banks with fresh capital in exchange for shares in the banks, as in the British plan.

Portugal's finance minister also announced Sunday that his government was offering a 20-billion-euro state guarantee for banks headquartered in that country.