Leaders meet on crunch weekend for European banking

International Monetary Fund managing director Christine Lagarde had talks in Paris with President Nicolas Sarkozy on a crunch weekend for the European debt crisis.

She made no comment either as she went into the Elysee palace or as she left an hour later.

The talks preceded a trip to Berlin by Sarkozy today to meet German Chancellor Angela Merkel, as eurozone leaders cobble together a plan to recapitalise banks overexposed to risky sovereign debt.

On Friday the European Commission gave member states 10 days to agree a plan to shore up their lenders, which Lagarde's IMF thinks will need between 100 and 200 billion euros ($135 billion and $270 billion) to cover potential losses.

French banks in particular are seen as overexposed to Greek, Italian and Spanish debts, and leaders fear a default in a weaker Mediterranean economy could trigger a financial crisis across the continent.

Highlighting the urgency of the task, ratings agency Moody's downgraded a dozen British banks over concerns government support for lenders could be withdrawn, and the Fitch agency downgraded Italy's and Spain's credit ratings.

The debt crisis, which began in Greece, has snared Ireland and Portugal and now put Italy and Spain in the firing line too, threatening to sink the entire euro project as banks find it hard to raise funding.

The French, German and Italian employers' federations on Saturday appealed for greater European integration, calling for a new treaty to get over "the current shortcomings of the eurozone".