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G7 to back US bank bailout plan, France says

Finance ministers and central bankers from the Group of Seven rich countries are likely to back the US markets bailout plan in a telephone conference, French Economy Minister Christine Lagarde said.

“We will be in a telephone conference to consider and very probably express our support for the American plan,” she told RMC radio in an interview, without saying when the teleconference would be held.

Lagarde was more guarded about prospects of following Washington's lead by setting up a fund to buy bad debts from banks which are struggling in the financial markets crisis.

“They are asking for other countries to take measures where appropriate,” she said, when asked whether the United States had asked France to help in its $700 billion bailout.

“We have not decided to take any measures apart from those that consist in forbidding what are called 'uncovered' sales, that is to say, selling what they have not yet bought.”

France's markets authority followed its peers in other countries on Friday by banning “naked” short selling, where market players sell short a stock without first borrowing the shares from another investor, such as a pension fund.

Lagarde has repeatedly said that French banks do not face the same risks as their US counterparts and that the domestic financial system is solid.

She said French banks had suffered losses amounting to around €20 billion ($29 billion) in the crisis over the past year and around €1.5 billion through the collapse of Lehman Brothers. But she repeated that they were not in danger.

“We know very well where the losses are and how much they are,” she said, adding that some banks, such as Societe Generale and Credit Agricole had had to raise fresh funds but that the sector was adequately capitalized.

“Everything is affected like all banks in the world but there are no worries over the solidity of these French banks,” she said. (Reuters)