BERLIN: Only the state can restore trust to financial markets now, German Chancellor Angela Merkel was quoted as saying on Sunday amid reports that Berlin was about to unveil a huge rescue package for its banks.

"Only action by the state is capable of restoring the necessary trust," Merkel was quoted as saying by the Bild am Sonntag weekly following talks on Saturday in France with President Nicolas Sarkozy.

"In this it is important that countries do not act unilaterally but that we coordinate at European and international level and then implement the measures within our national responsibilities," Merkel said.

"We are not doing it in the interest of the banks but in the interests of people," she told the paper.

Her comments came as the clock ticked down for leaders from the 15 nations of the eurozone and Britain meeting in Paris to hammer out a coordinated rescue package that would reassure investors before markets opened on Monday.

No details have yet been released, but there were signs that the 15 were leaning towards the policy already adopted in Britain under which the state guarantees inter-bank lending and buys stakes in banks.

In Germany, Europe's biggest economy, press reports said that following the meeting in Paris Merkel's government would announce a rescue package worth several hundred billion euros for its banks.

A government spokesman in Paris said that the chancellor would make a "political statement" in the French capital at around 4:45 pm (1445 GMT) before discussing Germany's plans with the other European leaders.

Berlin is expected to guarantee interbank loans with between 300 and 400 billion euros (405-540 billion dollars) and to provide banks with fresh capital in exchange for shares in the banks, similar to the partial nationalisation plan announced in Britain last week, the reports said.

A week ago Berlin put together a 50-billion-euro rescue of Hypo Real Estate, the country's fourth biggest bank, but this took the form of guaranteeing badly needed credit lines rather than the state taking a stake in the stricken commercial property lender.

Now though a dramatic deterioration of German banks' liquidity shortages, as markets have tumbled in the past week and short-term lending among banks has become even more difficult to come by, has forced a re-think in Berlin.

According to the Welt am Sonntag newspaper the capital injection alone would total more than 50 billion euros, while Handelsblatt reported that as much as 100 billion euros would be made available to stricken banks.

It also became clear that the worst hit are not private German banks like Deutsche Bank but the Landebanks, the regional lending powerhouses that are owned by Germany's 16 states, the reports said.

Sources in Berlin said that Merkel's cabinet would discuss the package on Monday with a view to it going through parliament and becoming law by the end of the week -- an aim that is far from certain in view of MPs' misgivings.

By shoring up Germany's banks, Merkel's government is attempting not only to calm stock markets -- Frankfurt's DAX lost more than a fifth of its value last week -- but also to stop panic bank withdrawals by consumers and to prevent the crisis spreading to other sectors of the economy.