Sarkozy has stressed the need for 'co-operation and convergence' on the economy [AFP]

The meeting on Saturday follows the approval of a $700bn rescue plan for troubled US financial institutions, but a similar deal for European banks seems unlikely.

French plans for a $416bn emergency fund, which were leaked to the media earlier in the week, were dropped after objections from Britain and Germany.

"The suggestion that there is a fund about to be formed across Europe ... there is no currency in that," Gordon Brown, the British prime minister, said on Friday.

Both nations are believed to have been reluctant to commit their taxpayers' money to a Europe-managed fund and instead advocate a case-by-case approach to rescuing financial institutions.

Co-ordination

With the rescue fund seemingly ruled out, France, Germany, Britain and Italy were likely to focus on the need to work together after Ireland guaranteed deposits at its six major banks. 

On Friday, Nicolas Sarkozy, the French president, wrote to Jose Manuel Barroso, head of the European Commission, stressing the need for an "intense effort of co-ordination and convergence" between EU states.

"Our citizens expect resolute action on our part to protect them," he said.

The Irish action drew criticism from Britain and other EU nations, who raised fears of capital flight from their banks to the better-protected Irish accounts.

The Irish government said it had no choice but to act in order to restore a sufficient level of confidence to improve their access to funds in capital markets.

'Systemic risk'

Jean-Pierre Jouyet, France's minister for European affairs, said that EU nations needed to agree on "intervening where and when it is necessary to prevent any systemic risk. All European banks are related".

He told Les Echos financial newspaper that European governments must look at co-operation on bank liquidity, credit lines and the system of asset-backed securities.

European governments have already had to step in and bail out several major banks, including Britain's Bradford & Bingley, Belgian-Dutch Fortis and Belgium's Dexia.

The summit came as the host nation became the latest country to fall into recession, according to official statistics.

The French economy shrank by 0.3 per cent in the second quarter of the year and on Friday the statistics agency forecast that gross domestic product would drop by a further 0.1 per cent in both remaining quarters of 2008.

Economists define a recession as two successive quarters of negative growth.

'Grand statement'

The EU leaders hope to forge a common position on tackling the financial turmoil before heading to a Group of Eight meeting of finance ministers in Washington next week.

But Marc Touati, chief economist at Paris brokerage Global Equities, was pessimitic about whether anything tangible would be achieved.

"There won't be any big measures taken, unfortunately. The best we can hope for is some grand statement on maintaining European unity.''

As well as the four leaders and Barroso, Jean-Claude Trichet, the European Central Bank president, and Jean-Claude Juncker, the Luxembourg prime minister who also chairs the group of euro-zone finance ministers, will attend the meeting.

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