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Gordon Brown today called on the banks to keep lending to small businesses despite the global credit crunch.
The prime minister welcomed a commitment by the European Investment Bank to make £4bn available to provide finance to firms in the UK.
Following talks in Downing Street with the German chancellor, Angela Merkel, Brown said it was now up to the banks in Britain to honour their commitments.
"We must continue to encourage banks to lend. Having re-capitalised the banks we must ensure that the money is used to sustain credit lines on normal terms to solvent businesses," he said.
"I urge banks not to change the terms and charges for existing lending to small and medium sized enterprises."
The prime minister said the wider economic problems could only be dealt with through concerted international action.
He said it was now essential that the International Monetary Fund played a central role in preventing the crisis spreading.
"This is a global problem that requires a global solution. No country, no matter how big, can solve these problems on their own," he said.
The prime minister also hinted that the UK government was poised to take further action to support businesses and families at this "time of international crisis".
Flanked by Merkel at a joint press conference, Brown said the two were "determined to continue the cooperation between our countries".
"We need comprehensive action, not just nationally but internationally, we need to come together to build confidence in the international system," Brown said. "We have now to show the financial system has been cleaned up in such a way that people can have confidence in it."
Asked whether the government should step in to demand a further cut in interest rates, Brown dodged the question, insisting a "comprehensive set of measures" were needed to tackle the problem.
That included interest rates.
He added: "I think you will find in the next few days we will do more to help families and small businesses."
Merkel said it was importand to learn from the crisis and encourage banks to use the help being made available to them.
"We have learned," she said. "But we need more transparency, strengthening of the IMF role… and more global division of labour."
The talks were part of an intense round of international discussions on the global economic crisis.
They came comes two days after the prime minister travelled to Paris for talks with the French president, Nicolas Sarkzoy, and ahead of a four-day trip to the Gulf for talks with oil-producing countries.
European leaders will gather in the French capital on November 7 to prepare their approach to a larger-scale summit in Washington on November 15, which will bring together the world's 20 biggest economies.
As efforts continued to deal with fallout from the crisis in the "real" economy, the British chancellor, Alistair Darling, urged UK banks to help get the new simplified loans out to small businesses, which were "vital to the strength of our economy".
The chancellor said: "We need to make sure that despite the global credit crunch, they have access to the loans and capital they need to help their businesses grow and develop."
He said the EIB's commitment would enable banks to get more finance to small firms and ensure the funding was more flexible and easier to access than in the past.
"This announcement will ensure British businesses get a fair share of European lending, and can access the best support available during these challenging times," said Darling.
"I welcome the strong support we have received from UK banks and I hope that as many banks as possible will participate in this scheme."
The chancellor last night defended the government's decision to increase borrowing to help kick-start economic recovery, saying it would be "perverse" to apply Gordon Brown's famous fiscal rules on government borrowing in a "rigid manner" when the economy was on the brink of recession.
But he pledged to stick to Labour's underlying principles for running the economy and to rebuild the public finances once the current financial "shocks" have worked their way through the system.
The chancellor also warned of "short and long-term challenges, placing extraordinary pressure on the tax revenues" - seen as a nod towards the possible need for future tax rises.
Today, the chancellor refused to add his voice to those calling for a further and significant interest rate cut but indicated there was scope for such a move.
- Gordon Brown
- Economic policy
- Germany
- European Union
- SMEs
- Credit crunch
- Banks and building societies
- Banking sector
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