ECB says will do what it takes

By Ros Krasny and Anna Willard

WASHINGTON/PARIS (Reuters) - The head of the European Central Bank on Sunday pledged to do whatever it takes to restore confidence to rocky markets, as governments world-wide pour cash into banks and financial markets hit by the worse economic crisis since the Great Depression.

South Korea was the latest country to join efforts to help stabilise markets, while the Dutch government agreed to pump some 10 billion euros (7.7 billion pounds) into ING, the country's largest listed bank.

Governments are looking to put into place measures to shore up their economies and global growth as the crisis spreads throughout the world.

They have pledged about $3.2 trillion (1.85 trillion pounds) -- about equal to the economic output of Germany -- to guarantee bank deposits and bank-to-bank lending, and in some cases have taken stakes in banks that are awash in bad assets.

ING will gain two government representatives on its board who will have veto power over certain decisions, in return for the huge capital infusion.

The moves come on top of huge cash injections into money markets and coordinated interest rate cuts to offer some respite to money markets, which have been gripped by the fear of more bank failures after U.S. investment bank Lehman Brothers went bankrupt.

Still, with markets ready to open for what will likely be another week of neck-braking volatility, efforts to break open a liquidity lock-down appeared to be paying off in the form of tighter credit spreads.

ECB Governing Council members Erkki Liikanen of Finland and George Provopoulos of Greece said rates would fall as trust increases between banks following the measures taken by central banks and governments.