Germany, France reach agreement on banks

The leaders of Germany and France, theeurozone's two biggest economies, said on Sunday they have reached an agreementabout how to strengthen Europe's shaky banking sector amid the region's debtcrisis.

"We are determined to do the necessary to ensure therecapitalization of Europe's banks," German Chancellor Angela Merkel following talks with French President Nicolas Sarkozy in Berlin.

A "comprehensive response" to the eurozone's debtcrisis will be finalized by month's end, including a detailed plan onrecapitalizing the banks, Sarkozy said at Berlin's chancellery.

"The economy needs secure financing to ensure growth.There is no prospering economy without stable banks," he said. "Thatis what is at stake."

However, both leaders declined to name a price tag for thenew measures or elaborate further, saying the proposal must first be discussedwith other European leaders.

Analysts have urged the eurozone to identify all the banksin the region that need to replenish their capital reserves, then decidewhether to compel them to raise that money on the open markets and to providegovernment financing to the ones that can't.

Many experts say the capital cushions of many European banksmust be strengthened in order to withstand a possible government bond defaultby Greece.Some analysts fear that a Greek default could cause a severe credit squeezethat would even threaten banks not exposed directly to Greece's debtbecause banks could be afraid to lend to each other.