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ECB offers banks emergency loans

The European Central Bank (ECB) is offering new emergency loans to banks to help steady a eurozone financial system that is being shaken by uncertainty over the government debt crisis.

ECB president Jean-Claude Trichet said the bank would offer an unlimited amount of 12-month and 13-month credits. That will provide banks financing for a longer period.

Mr Trichet also said the bank would buy up to 40 billion euro (£34.6 billion) in covered bonds, a type of security used by banks to raise funding.

Borrowing between banks, crucial for their daily functioning, has become increasingly difficult because of fears the money might not get repaid.

It is expected that the ECB's presence will help free up that market and make borrowing easier for banks.

Earlier the ECB left its key interest rate unchanged at 1.5 %, although many economists think the bank has only postponed a cut to stimulate the eurozone's economy.

Meanwhile German Chancellor Angela Merkel is hosting a meeting of the heads of the International Monetary Fund and the World Bank in Berlin.

The meeting will also include Mr Trichet and finance ministers from France, Germany and Mexico.

Mrs Merkel spoke out in favour of a co-ordinated recapitalisation of Europe's banking sector on Wednesday amid concern whether Europe's banks would be able to cope with a Greek sovereign debt default.

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