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euroBERLIN: Europe's leaders Friday sought to reassure investors the continent's banks were safe, stepping up calls for cash injections to prevent a credit crunch.

German Chancellor Angela Merkel, who has said banks should be recapitalised without delay if need be, insisted the 440-billion-euro ($592 billion) EU bailout fund, the EFSF, should only be used for this as a last resort.

"First, the banks must try and get capital for themselves," Merkel said after a meeting with Dutch Prime Minister Mark Rutte.

"If this is unsuccessful, then national instruments should intervene, as was the case in 2008 and 2009,

"Only if a country cannot do this with its own means, then the EFSF can be used as an option, but on the condition that the country undertakes its own structural reforms," she told reporters.

As if to highlight the urgency of the task facing Europe, ratings agency Moody's downgraded a dozen British banks over concerns government support for lenders could be withdrawn.

Meanwhile, France urged European governments Friday to work together on a plan to recapitalise banks left vulnerable by the eurozone sovereign debt crisis and denied any rift with Germany over the issue.

The finance ministry admitted that some French banks were in need of finance but said EU member states should coordinate their response and draw up a common timetable for recapitalisation.

"It is essential that there be coordination at a European level to determine three things -- the amount of capital needed, the timetable under which this level of capital be achieved and the tools to do that," the ministry said.

There have been reports that France and Germany are divided on how the fund should be deployed, two days before French President Nicolas Sarkozy is due in Berlin for talks with Merkel.

Germany's business daily Handelsblatt said Paris wanted to use the fund to recapitalise lenders exposed to shaky bonds, while Germany believed banks must dig into their own pockets first.

Jose Manuel Barroso said Thursday the European Commission was proposing "coordinated action" by the 27 European Union states to recapitalise banks, with efforts already under way.

The EU executive said Friday it will offer a framework in "coming days" for the move.

Stopping short of an interest rate cut, the European Central Bank announced

new measures Thursday to provide cash-strapped banks with liquidity, cheering markets with news it would beef up "non-standard" action to help out lenders.

France's Jean-Claude Trichet, bowing out as president of the Frankfurt-based ECB after eight years, said the bank would continue to assist lenders although he also urged them to bolster their balance sheets.

However, official data in Frankfurt showed overnight deposits at the ECB made by eurozone banks hit a fresh 2011 peak Thursday for the fifth day running, a signal of a growing credit crunch as the banks become more reluctant to lend to one another.

Moody's Friday downgraded its credit ratings for a dozen British lenders, including state-rescued Royal Bank of Scotland and Lloyds TSB, due to the removal and curtailment of government financial support.

Merkel, whose country is Europe's paymaster and biggest economy, continued a flurry of international meetings, holding a working lunch Friday with Dutch Prime Minister Mark Rutte.

Germany, she said at a joint press conference afterwards, "absolutely supports" a Dutch proposal to appoint a separate European commissioner purely to ensure that eurozone nations abide by the bloc's budget rules.

"The ability to intervene when countries repeatedly break the pact has not yet been fully fleshed out and so the Dutch proposal is a good one," Merkel told reporters, refering to the EU Stability and Growth Pact that limits deficits.

The debt crisis that began in Greece, snaring Ireland and Portugal on the way and now threatening Italy and Spain, is putting at risk the whole euro project as banks exposed to sovereign debt find it impossible to raise funding.

On Thursday, shares in Franco-Belgian lender Dexia were suspended as the two countries scrambled to put together a rescue for the bank, the first European bank to be dragged down by the eurozone debt crisis and which also had to be bailed out in 2008.

In Athens, Germany's economy minister Philipp Roesler called for more stability in the eurozone to deal with debt turbulence as Greece pledged to fully repay its EU loans.

"We need to come to more stability in the eurozone, so that we can send a clear signal that we are ready to fight for our common currency," Roesler said.

"We agreed there are two main causes for the crisis: a lack of competitiveness and the high debt," said the minister, who is also Germany's vice-chancellor.

Greek Finance Minister Evangelos Venizelos told the same news conference that Athens intended to repay all its loans in full.

Copyright AFP (Agence France-Presse), 2011