PARIS – British and European leaders took unprecedented steps here late Sunday to try to halt a galloping financial crisis in its tracks, announcing aggressive action to take big stakes in banks and guarantee lending between banks.

European Union members announced they planned to guarantee loans between banks, called inter-bank lending, for up to five years. And they intend to allow member countries to take equity stakes worth billions of dollars in troubled financial institutions.

‘Tool kit’

The leaders of European nations presented their plan as a “tool kit” that each country could decide how best to put to use. France, Germany and Italy are all expected to adopt the plan formally on Monday morning.

As in the United States, the rescue of banks is hardly a popular notion, and Sarkozy echoed statements of recent weeks made by President Bush and others.

“We are not handing out gifts to banks,” Sarkzozy said. “We are enabling banks to operate, because our economy depends on it.”

Bold action

The action represents a bold move as markets reopen following what in many nations across the globe was the worst week on stock exchanges since the Great Depression.

The hasty emergency action is also EU leaders’ first such coordinated aggressive move since they adopted a common currency, the Euro, now used by 15 nations.

This move aims to thaw the credit markets, which have frozen up as banks hoard what little capital they have and refuse to lend to each other or even brand-name corporations. The European Central Bank and the U.S. Federal Reserve have worked furiously in recent months to provide emergency short-term loans to banks to prevent a complete halt to inter-bank lending.

The European and British approach differs greatly from the controversial $700 billion rescue package approved with great difficulty last month by the U.S. Congress. That plan, pushed by Treasury Secretary Henry Paulson, sought to use taxpayer money to purchase distressed assets from banks to help boost their balance sheets. Most of these assets would be mortgage bonds at the root of the widening financial crisis.