Europeans split as U.S. Senate weighs bailout

By Daniel Trotta and Richard Cowan

NEW YORK/WASHINGTON (Reuters) - World markets braced for a U.S. Senate vote on Wednesday over a proposed $700 billion (392 billion pound) bailout seen as crucial to reviving paralyzed credit markets while European powers squabbled over their own version of a rescue.

A slack-jawed financial world came to a halt on Monday while watching the House reject a previous version of the bill, sending global markets into tailspin after weekend negotiations on Capitol Hill had been expected to ensure passage.

Central bankers and pensioners worldwide were counting on the rescue plan to empower the U.S. Treasury to buy distressed assets from financial firms staggering under the weight of failed mortgages, intending to clean up their balance sheets and jump-start lending.

Congressional leaders added two sweeteners to the bill -- a tax cut and extended federal protection for bank deposits -- with the expectation it would sail through the Senate and then return to the House for an up-or-down vote.

The White House and European policy makers called the measure crucial to world financial health with recessionary signals mounting in the world's largest economy and the credit crisis reverberating among European banks.

In Europe, France and Germany clashed over the idea of a U.S.-style financial rescue fund for Europe amid further signs of contagion from the global credit crisis.

Italy's UniCredit became the latest bank under scrutiny after backing away from its 2008 earnings targets.

BUFFETT TO THE RESCUE