France and Germany clash on bailout

By Huw Jones and Paul Taylor

BRUSSELS (Reuters) - France and Germany were at loggerheads on Wednesday over the idea of a U.S.-style financial rescue fund for Europe as EU governments went their separate ways in response to the global credit crisis.

The European Commission appealed for more consistency in deposit guarantee schemes and stronger pan-European financial supervision, but the apparent discord between Paris and Berlin underlined the difficulty of finding a common approach.

French Finance Minister Christine Lagarde said in a German newspaper interview that a "European safety net" could be needed to prevent a bank in a smaller EU country from going bankrupt.

But Chancellor Angela Merkel said Germany "cannot and will not issue a blank cheque for all banks, regardless of whether they behave in a responsible manner or not."

A European government source said Paris had floated the idea of a 300 billion euro (237.2 billion pounds) EU rescue fund ahead of a meeting of leaders of the four big European powers and top EU officials tentatively set for Saturday in Paris.

But Lagarde told reporters: "There is no such thing. There is nothing of the sort," when asked about the report.

The German Finance Ministry said: "The government completely disagrees with these plans."

European Commission President Jose Manuel Barroso said he was working closely with French President Nicolas Sarkozy to present proposals to the leaders in Paris.