European Union (EU) finance ministers were set to meet late Monday, with chances growing for an EU-wide bailout fund to contain a global financial crisis after it was rejected by EU leaders at a weekend summit.

"Ministers will discuss the economic situation, with particular attention to the financial market crisis," the European Commission said in a press release.

As a usual practice, the monthly gathering of EU finance chiefs would start with a meeting among Eurozone members on Monday evening and then expand to all EU countries Tuesday.

They met at a time when the economic situation and outlook for Europe have turned exceptionally uncertain in the most recent weeks. The crisis in financial markets has deepened, with many key credit markets barely functioning and central banks having stepped up their efforts to avert a global liquidity squeeze.

The past weeks have seen several European banks falling prey to the crisis triggered by a credit crunch in the United States, prompting European governments to save their banks by injecting a large amount of money or even being nationalized.

However, such rescue actions are more often than not moves on national level or by several EU member states on an ad hoc basis without EU-wide coordination and concerted efforts by the whole Europe.

In a bid to seek EU response, leaders of the bloc's big four --France, Germany, Britain and Italy -- held an emergency meeting on Saturday in Paris.

Despite their pledge to coordinate in tackling the current financial crisis, divisions in Europe remained obvious, especially on the issue of whether to follow the U.S-style bailout plan.

French President Nicolas Sarkozy had been reportedly in favor of an EU-wide bailout fund modeled after the U.S. 700-billion-dollar rescue package, but the idea was immediately rejected by Germany, which allows no room for the weekend summit to make any progress in this regard.

Barely one day later, the idea was revived by Italy.

Italian Premier Silvio Berlusconi said in Rome on Sunday that his country would resurrect the idea of creating a joint EU bailout fund at the meeting of EU finance ministers after Berlin changed its mind.

Berlusconi said German Chancellor Angela Merkel could not accept the proposal at Saturday's summit because she did not have the power.

"Today, on the contrary, she said she agreed. France will do the same," Berlusconi was quoted as saying by Italy's ANSA news agency.

Germany, the EU's biggest economy, was also forced to guarantee all private bank deposits on Sunday to ensure financial stability, one day after Merkel criticized a similar move taken by the Irish government.

The escalating financial crisis, together with inflation pressure due to elevated commodity prices and severe housing market corrections in some EU member states, has put the European economy on the brink of recession, with Ireland and France already showing negative growth in two consecutive quarters.

"This is a very serious situation and one that needs to be addressed," EU Commission spokesman Johannes Laitenberger said ahead of the finance ministers' meeting.

Even before the recent wave of financial storm, the European Commission on Sept. 10 revised downwards its economic growth forecasts for 2008. At that time it was stressed that risks to the growth outlook were on the downside.

The commission said "the dramatic events in financial markets in the last few weeks are reinforcing that view."

(Xinhua News Agency October 7, 2008)