Berlin  - Economists appealed Thursday for European Union governments to mount a joint bail-out of troubled banks rather than each nation acting for itself when banks stumble.

"Last week's US experience showed that saving one bank at a time won't work. A systemic response is needed and in Europe that means an EU-led initiative to recapitalize the banking sector," they said.

The call to action was issued in Berlin by the DIW German Institute of Economic Research.

The 10 signatories included DIW chief Klaus Zimmermann and economists from the Italy, the Centre for European Policy Studies in Brussels, the London School of Economics and Harvard University.

"Turmoil in financial markets must be stopped before it causes major damage to the real economy," the economists said. "The savings of hundreds of millions of Europeans are directly threatened."

"Each national policy intervention and each cooperative intervention by a small number of countries can have unpredictable implications for other European nations," they warned.

They said only a rapid, Europe-wide, coordinated approach could prevent the turmoil on financial markets racing out of control.

"The EU contribution must be centred on a recapitalization of the banking sector, through the injection of public equity or through mandatory debt-to-equity conversions."