(LUXEMBOURG) - European finance ministers face pressure Monday and Tuesday to contain the US-born financial crisis whipping through Europe as the idea of a joint US-style bailout fund resurfaces.

At crisis weekend crisis talks in Paris, leaders of Britain, France, Germany and Italy vowed to to protect fragile banks, but shunned the possibility of a European rescue fund.

Barely 24 hours later, Prime Minister Silvio Berlusconi said Italy would resurrect the idea of such a bailout fund at a meeting of eurozone finance ministers in Luxembourg on Monday and all of their EU counterparts on Tuesday.

Berlusconi was quoted by the ANSA news agency as saying that minds had changed since the idea failed to gain traction at the Paris mini-summit.

On Saturday in Paris German Chancellor "Angela Merkel couldn't accept" the proposal "because she didn't have the power. Today, on the contrary, she said she agreed. France will do the same," Berlusconi was quoted as saying Sunday.

The Netherlands floated the idea of national bailout funds last week amid swirling rumours of a European rescue fund, but Germany quickly ruled out the possibility of an EU-wide approach.

However, since then the situation has taken a sharp turn for the worse in Germany as Berlin was forced on Sunday to hastily arrange a state-backed bailout of the country's fourth largest bank, Hypo Real Estate, by private institutions.

In a bid to assure increasingly jittery savers, Germany also made an about-face by offering savers unlimited protection on all private bank deposits, despite having criticised Ireland for a similar move last week.

Finance ministers from other EU countries were facing pressure for copy-cat measures in the absence of a Europe-wide approach.

After Germany's move, British opposition politicians urged the government to do the same while Vienna said it would take a decision on Wednesday on whether to increase deposit protection.

Ireland's decision last week prompted fears that depositors in other EU countries, particularly Britain, would rush to park their savings in Irish accounts, potentially causing competition and state aid problems.

The speed at which the financial crisis whipped across Europe over the last week has put finance ministers to the test, as the European Union struggles to show unity.

Since the start of the turmoil in August 2007, EU finance ministers have done little more than draw up a road-map to strengthen the stability of the financial system in Europe.

With a growing number of European banks pushed to the brink of collapse over the past week, a new sense of urgency has emerged in Europe as leaders realise the crisis is not just a US problem.

In the absence of a US-style rescue plan for Europe, finance ministers could find themselves facing a serious challenge if a big European bank with cross-border activities were to run into trouble.

Dutch, Belgian and Luxembourg authorities proved they could rise to the challenge over the last week when Fortis bank hit the rocks, but that may not always be the case if a bigger bank were to flounder.

The EU finance ministers are also due to consider recommendations to tighten executive pay rules, with plans to limit so-called golden parachute bonuses which some corporate fat cats have received even when they stood down in disgrace.

Economic and Financial Affairs Council (ECOFIN)

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