European leaders are expected to follow Britain's lead in trying to weather the financial crisis by guaranteeing medium-term loans between banks, it emerged yesterday.

Fifteen European leaders met in Paris to hear the detail on Prime Minister Gordon Brown's rescue package for UK banks before hammering out a "co-ordinated" action plan to support and protect financial institutions across the continent.

According to a draft statement, they now plan to underwrite loans between banks "on appropriate commercial terms" for up to five years.

"This scheme would be limited in amount, temporary and will be applied under close scrutiny of financial authorities until December 31, 2009," it stated.

European leaders raced against the clock yesterday to draft a rescue strategy for banks hit by the worst financial crisis since the 1930s, and have been focusing on pledges to recapitalise banks or buy debt they issue.

It is hoped the loan guarantees will kickstart the reversal of the credit crunch, with banks' unwillingness to lend to each other slowly drawing the lifeblood out of the financial system.

According to a draft statement circulated at their summit in Paris, the 15 eurozone leaders are working on a 14-point plan, of which two key ingredients are the commitments to provide capital and ensure or directly buy into debt issues.

The statement also says the eurozone leaders are determined not to let any major financial institutions fail and will step in to provide extra capital if necessary.

The text sends a direct warning to the banks many people blame for the current crisis. It said: "We will be watchful regarding the interest of taxpayers and ensure that existing shareholders and management bear due consequences of the intervention."

Banks that receive emergency recapitalisation will have to follow an "appropriate restructuring plan".

The pledge to help or directly subscribe to debt-raising by banks for periods of up to five years was meant to compliment efforts by the European Central Bank to unfreeze inter-bank lending markets.

France and Germany are expected to unveil bank rescue packages worth hundreds of billions of pounds today, officials said.

European countries have given themselves until Wednesday to decide how much each will set aside to recapitalise failing banks and guarantee inter-bank lending, the Belgian Finance Minister Didier Reynders said.

Yves Leterme, the Belgian Prime Minister, yesterday said several European leaders wanted to put a cash figure on a draft plan to recapitalise fragile banks, but he cast doubt on whether this would be possible.

"There are several who are calling for sums tonight, but I don't think it will be in the conclusions," he said during a break in the discussions at the Elysee Palace.

On Wednesday, the 15 nations will meet again in Brussels, this time along with the remaining 12 European Union members that have not adopted the euro.

Mr Brown, who was invited to the Paris meeting, said he believed the measures to help stem the financial crisis would go ahead.

"We discussed a comprehensive plan that would involve not only cash in financial markets, but also recapitalise our financial system and fund mortgages," said Mr Brown.

"I believe our European colleagues will move ahead with the comprehensive plan. There's common ground now. I saw a collective spirit, a co-ordinated approach, people wanting to take action together."

French President Nicolas Sarkozy told reporters the meeting would come up with an "ambitious plan" to tackle the crisis, which has hit fever pitch in recent weeks. Officials suggested action rather than rhetoric would emerge from a gathering that involved the leaders of Britain and the 15 countries of the euro currency zone, as well as European Central Bank President Jean-Claude Trichet.

"If market confidence is not restored this weekend, it's game over," said Marco Annunziata, chief economist for UniCredit, an Italian bank which is among many whose shares have been hurt in panic-stricken stock markets.

The Paris meeting was hastily arranged by Mr Sarkozy on the heels of a G7 summit of rich nations in Washington that offered no concrete, collective action but promised to do whatever was needed to unfreeze credit markets.

Britain's rescue plan makes available £50bn of taxpayers' money for injection into its banks and, crucially, calls for underwriting inter-bank lending. At another crisis summit in Paris a week ago, German leader Angela Merkel rejected the idea of a collective European rescue fund for banks, and Mr Sarkozy said he had not proposed one.

On Saturday, Germany was reportedly readying a rescue package that could be worth up to £316bn, including the injection of equity capital worth "double digit" billions into its banks and guarantees for inter-bank lending.