France’s top six banks are to receive a €10.5 billion (£8.2 billion) cash injection from the Government by the end of the year in a move designed to oil the wheels of a rusting economy, Christine Lagarde, the Finance Minister, said last night.

Mrs Lagarde, who announced the initiative after a meeting with bank executives, said the State would subscribe to subordinated debt, but not take shares in the groups.

Under the plan, Crédit Agricole will receive €3 billion, BNP Paribas €2.55 billion, Société Générale €1.7 billion, Crédit Mutuel €1.2 billion, Caisse d’Epargne €1.1 billion and Banque Populaire €950 million.

Mrs Lagarde said the Government was prepared to inject a further €10.5 billion next year “if tensions persist in the markets”.

Bank executives will be told to limit their earnings and facilitate lending to households and business in return for the state help.

But after a jittery day on the stock exchange for French banks, Mrs Lagarde was at pains to avoid scaring investors with suggestions that they needed a capital increase.

She said the funds – likely to be drawn from the €40 billion set aside by the Government to help crisis-torn banks – were designed to ease credit in a fast-slowing economy.

Christian Noyer, the Governor of the Bank of France, said: “The aim of the operation is not to recapitalise the banks but to support the financing of the economy.”

The French central bank added in a statement: “All the banking groups concerned have a totally satisfactory level of capital.”

But the announcement came after analysts said leading European banks would need to raise up to €73 billion to compete with their recapitalised British rivals.

Coupled with growing concerns about the weakening eurozone economies, their report prompted shares in SocGen to fall by 11 per cent, before recovering to close more than 3 per cent down. Merrill Lynch fuelled speculation about the French bank’s strength by saying that it could require a €6.5 billion injection.

BNP Paribas, SocGen’s big French rival, closed down 1.85 per cent after the analysts said that it may need a €7.3 billion capital increase. UniCredit, the Italian bank, fell 2.6 per cent after they said that it could be forced to ask for €7.4 billion. In Germany, Deutsche Bank survived the chaos to close up 3.96 per cent even though Merrill Lynch said that it may need €8.9 billion.

In a move that may presage a wave of bailouts, ING, the Dutch bank and insurer, rose by 29.2 per cent after receiving €10 billion of state funding. Under the deal, the authorities bought one billion of a new class of shares in an attempt to shore up the group without diluting the value of existing stock.

The injection came after ING’s value slumped by 27.48 per cent on Friday amid concern over its health. The Dutch market regulator said yesterday that it was investigating trading in ING shares on Friday for possible market abuse.

Costly rescue

France: €40bn to recapitalise banks, and €320bn fund for guaranteed loans

Germany: €100bn for bank recapitalisation, and €400bn for loan guarantees

Spain: €30bn to buy bank assets, and €100bn for loan guarantees

Holland: €20bn to recapitalise banks and €200bn for loan guarantees

Italy: €20bn to recapitalise banks. Treasury guarantee for new bonds issued by banks

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