updated 10/1/2008 9:18:07 AM ET 2008-10-01T13:18:07

Europe needs to “inject credibility” into its efforts to tackle the current financial crisis, the head of the European Union’s Commission said Wednesday, as a major U.S. banking bailout hangs in the balance.

European governments have moved fast in recent days to commit billions of euros to rescue struggling banks within their own countries — sometimes moving jointly even though there is no EU-wide action plan for banks that operate across several nations.

“We are asking and urging member states for closer cooperation. It is critically important for confidence in the markets,” said EU Commission President Jose Manuel Barroso. “It’s not just a problem of injecting liquidity, we also need to inject credibility in the European response.”

He said the banking meltdown was now “most likely” going to affect the wider economy — and governments had to think long-term on fixing the financial system to restore stability and confidence.

“The real economy is now under very severe pressure,” he said, calling for a global response to deal with a crisis affecting financial markets and economies around the world.

Barroso said European Union regulators were ready to put forward specific plans to improve banking supervision in Europe, to set new rules to value complex banking assets, improve the consistency of deposit guarantee schemes and make executive pay more transparent.

“We are in a situation where only with a coordinated action from all those involved, we can restore confidence in the markets,” he said. “We must first of all address urgencies and then make our structures future-proof.”

Banking shares have plummeted following Monday’s failure of the U.S. House to approve a $700 billion plan to buy up bad debt from banks and unfreeze lending. Traders also lost confidence that many European banks could cover their debt or absorb huge losses racked up from high-risk investments based on U.S. housing loans.

Stock prices only recovered after European governments moved to shore up banks by injecting them with large amounts of money.

The Bush administration is pushing for congressional action on the plan, however, and the Senate could soon vote on an amended version of the plan.

Angel Gurria, secretary-general of the Paris-based Organization for Economic Cooperation and Development, or OECD, suggested European nations might have to consider a joint bailout plan similar to the massive U.S. plan.

“Considering the exposure of European financial institutions, we might have to start thinking of a systemic plan for Europe if things don’t improve on the other side of the Atlantic,” Gurria told European lawmakers in Strasbourg, France. “The piecemeal approach may not work in Europe either.”

“The situation is indeed critical. We are facing the worst financial crisis since the Great Depression and its consequences are already spreading beyond the financial sphere, throughout the globe,” he said

He called on the OECD’s 30 member nations to “draw up lessons and conduct a major debate on the necessary reform of the international financial system.”

Gurria said the EU, United States and others had to learn from the flaws of the current financial system, notably allowing banks and lenders to hand out “ninja loans,” — short for “no income, no job, and (no) assets” — which Gurria said had to end.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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