European policymakers yesterday clashed over how to protect the EU’s financial system from the global credit crisis as France floated the idea of a single rescue fund to deal with bank failures.

Christine Lagarde, France’s finance minister, raised the possibility of a European fund 'to support the financial sector'.

However, the idea of a fund – which some officials said could have been as large as €300bn (£237bn) – was immediately rejected by Germany and, by last night, France was rowing back. Britain is also sceptical about the idea of a pan-European fund, preferring to tackle crises on an ad hoc basis, although officials in both the Bank of England and the Treasury are working on a range of plans in case a more co-ordinated approach arises.

Financial Times