Europe's biggest economy, Germany, put together a rescue package worth as much as $671 billion to shore up the country's financial system. "We are taking drastic action, no question about it ... so that what we have experienced is not repeated," Chancellor Angela Merkel said.

Sarkozy said the French government would provide up to $491 billion to help banks, most of that in guarantees for bank refinancing. The Netherlands put up $273 billion to guarantee interbank loans.

Austria's government offered up to $116 billion. Spain said it would guarantee up to $135 billion in a bank bond issuance this year. Portugal guaranteed $27 billion — nearly 12 percent of annual GDP — to encourage its banks to lend to each other.

Italy did not earmark a specific amount but Finance Minister Giulio Tremonti said the government would offer "as much as necessary."

The European moves are modeled on Britain's $88 billion plan to partly nationalize major banks. Prime Minister Gordon Brown has also promised to guarantee a further $438 billion worth of interbank loans to restore confidence in the financial sector.

The head of the International Monetary Fund welcomed the European decision despite the high price it is expected to impose on state budgets.

"We must recapitalize the banks ... otherwise everyone will suffer," Dominique Strauss-Kahn said on France's Europe-1 radio Monday. "And that costs money."

The euro zone leaders have yet to sell their packages to voters at home, and analysts warned that governments and legislators could still balk. The overall cost will be heavy, especially on countries already in or on the brink of recession. Bank of America economist Gilles Moec says the bailout plans will not immediately and directly affect the public deficits.

But he expects some countries to boost spending or lower taxes to mitigate the impact of the credit crunch on the real economy — which combined with the effects of the economic slowdown could bring the deficit to 4 percent of GDP in 2009 in France and 3.2 percent in Italy.

Governments that use the euro are bound by budget rules that limit their deficit to 3 percent, although France and Germany have broken the rules in the past.

Merkel said the government may have to defer its aim of delivering a balanced budget in 2011.

French Budget Minister Eric Woerth said he isn't revising his forecast for a national budget deficit of 2.7 percent this year. He said the bank refinancing is structured so that if many banks take up the offer, the state would make money.

The rest of the 27-member EU will have a chance to sign up to the euro-zone measures when they meet Wednesday.

Norway, outside both the euro zone and the EU, said it plans to offer new government bonds worth $55.4 billion to banks to help improve liquidity in the market.

In Sweden, Finance Minister Anders Borg said the government plans to put forward a draft law Wednesday to guarantee new bank debt until the end of 2009 and support banks with added share capital.

BusinessEurope — a group representing most European major companies — said EU governments' parallel moves to unfreeze bank lending would help "reinforce confidence and contribute to a continued flow of credit to companies and households."

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Associated Press writers Melissa Eddy in Berlin, Malin Rising in Stockholm, and Jamey Keaten in Paris contributed to this report.