France and Germany today agreed to pledge €820 billion (£642 billion) to the future of their country's banking systems following Britain's ground-breaking £37 billion bailout.

The German cabinet has approved a package of €400 billion in bank guarantees and an additional €80 billion of fresh capital for its banks.

In a statement, the German Finance Ministry said: “Such unusual market conditions call for unusual measures. It is not just about protecting banks and other financial institutions but also about protecting citizens."

Meanwhile, Nicolas Sarkozy, the French President, announced that France will commit up to €40 billion to rescue the country's banks, and guarantee up to €300 billion in interbank loans. Mr Sarkozy pledged that: “Nothing will be spared to prevent the crisis getting any worse.”

The moves from France and Germany follow the £37 billion intervention by the British Government to bail out the leading high street banks, Royal Bank of Scotland, HBOS and Lloyds TSB.

The emergency refinancing, outlined this morning by Gordon Brown and Alistair Darling, could, if the Government were to become the majority shareholder in the banks, amount to part-nationalisation.

But Mr Brown refuted this suggestion, insisting that the injection of government cash into the banks did not amount to nationalisation of the kind seen in other industries in the post-War period.

"This is not standard public ownership," he said. "This is the Government buying shares, allowing the banks to be run commercially, making sure that we can encourage other investors into the banking system, then – because our holdings are temporary – being ready to sell them when the banks are strengthened.

"I think you will find over the rest of Europe over the next few days exactly the same thing will happen."

Today's measures follow the promise of co-ordinated rescue packages from 15 European leaders during an emergency summit in Paris this weekend.

Angela Merkel, the German Chancellor, said that Germany's €480 billion package had to be accompanied by an improvement in international regulation to curb "market excesses".

“Today’s measures are the first element of a new financial market charter...but it can only be worthy of the name if it is followed by a second element, namely a change in international rules,” Mrs Merkel said.

Her words echoed those of Gordon Brown earlier today, when he called for an end to the days of inflated City salaries.

"Our action is driven by our values," Mr Brown said. "For this Government, and I believe the whole country, the guiding idea is fair reward for hard work, effort and enterprise, not incentives for irresponsibility or excessive risk-taking for which the rest of us have paid."

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