* EU seeks measures to restore financial confidence
* Finance ministers considering higher deposit guarantees
* Irish minister says talks consider 100,000-euro floor
* Czech minister says that's too much, politicians "crazy"
* Iceland pegs battered currency
By Jan Strupczewski and Paul Carrel
LUXEMBOURG, Oct 7 (Reuters) - EU finance ministers, seeking
a confidence-booster as the global financial crisis pounded tiny
Iceland on Tuesday, debated a hike in minimum levels of bank
deposit insurance across the 27 European Union countries.
As they met in Luxembourg, shares in some of Britain's big
high street banks tumbled on reports of talks about possible
government cash injections and a source in the industry said
more urgent talks would take place in coming days.
Iceland said Russia was lending it 4 billion euros ($5.44
billion) to help it fight the financial firestorm after
Reykjavik nationalised its second-largest bank and announced it
would peg its currency as a stabilisation measure.
Under pressure from fast-moving events, the EU ministers in
Luxembourg were engrossed in discussions about collective moves
on deposit protection.
Irish Finance Minister Brian Lenihan, in the dog-house with
some European partners after Dublin unilaterally took radical
steps to stabilise Irish banks, said a figure of 100,000 euros
was an option, compared to a minimum now of 20,000.
"Clearly anything we can do to give greater confidence among
depositors is very important," Lenihan told reporters on arrival
for the ministerial talks.
"Certainly anything that can stop the movements between
accounts would be very welcome," he said. Some British savers
shifted deposits to Irish banks after Dublin issued an unlimited
guarantee last week.
In a swipe at such national moves, Swedish Finance Minister
Anders Borg said: "We need to find a common solution as one
country's solution may be another country's problem."
European governments are struggling to shelter banks and
depositors from the financial crisis that snowballed from the
United States and is now rattling confidence, pummelling stocks
and paralysing wholesale money markets in Europe.
Central bankers are pumping emergency funding into interbank
markets to keep a fear-riven financial system from seizing up
and European Central Bank President Jean-Claude Trichet said on
Monday night they would continue to do so as long as needed.
"COUNT ON THE ECB"
"You can tell the citizens they can count on the ECB," he
told a news conference in a rare appearance after talks with
euro zone finance ministers preceding Tuesday's wider meeting.
Other central bankers joined the fray on Tuesday to try to
provide reassurance too as world stocks slid again after the big
falls of Monday.
"We have no reason to think the stock markets will collapse.
There is no reason for that to happen. The companies behind them
are companies that are fundamentally solid," French central bank
governor Christian Noyer said.
Portugal's central bank head Vitor Constancio said the
financial crisis would clearly take a toll on the economy but he
did not expect generalised recession.
European shares turned negative after starting the day with
a rise of more than 2.5 percent, the renewed slide largely
attributed to reports of additional funding needs for banks.
The discussion of a collective increase in minimum levels of
protection for savers follows a general political pledge by EU
leaders on Monday that people should not fear for their savings.
"All European Union leaders declare that each of them will
take the necessary measures to ensure the stability of the
financial system," the 27 leaders said in a statement on Monday
read by French President Nicolas Sarkozy, whose country holds
the rotating EU presidency.
"No depositor in our countries' banks has suffered any
losses and we will continue to take the measures needed to
protect the system and depositors," it said.
Showing how hard it is to agree a common line with ease in
Europe, Czech Finance Minister Miroslav Kalousek was quoted by a
newspaper as saying Europe's politicians were going mad with
ideas of such big rises in deposit insurance.
"Politicians in Europe are going crazy. We didn't live
through 40 years of real socialism only to return to it on the
soil of the European Union," he was quoted by daily Hospodarske
Noviny as saying.
IRISH IRE
Germany and others are annoyed with the Irish for going it
alone with state guarantees for all liabilities of six Irish
banks, and doing so via legislation rather than the political
commitment that is being made elsewhere so far.
One worry is that the measure discriminates against
non-Irish banks and skews EU principles that business must
compete on a level playing field.
What sets Ireland's plan apart is that its government not
only guaranteed savers' deposits but also banks' wholesale
liabilities, meaning an institution lending to an Irish bank on
interbank money markets knows the borrower is state-protected.
The difference is critical because the potential cost of
effectively underwriting bank-to-bank lending compared with just
retail deposits is far higher.
Ireland has guaranteed some 400 billion euros in total,
double its entire annual economic output. Roughly half of the
funds guaranteed are retail deposits.
Several countries including Germany, France and Britain made
political pledges to savers prior to Monday's EU-wide political
commitment, but they stopped way short of offering such blanket
assurances to banks and others in the financial business.
An EU-wide minimum deposit insurance level of 100,000 euros
would still be less than the $250,000 written into the $700
billion rescue plan the U.S. administration is rushing to
implement to stabilise the economy and markets there.
(Writing by Brian Love, with additional reporting by Jamie
McGeever in London, Francois Murphy and Tamora Vidaillet in
Paris and, in Luxembourg, Marcin Grajewski, Anna Willard, Huw
Jones. Plus Axel Bugge and Sergio Goncalves in Lisbon, Jana
Mlcochova in Prague, and Omar Valdimarsson in Reykjavik; Editing
by Dale Hudson)
