BRUSSELS (Belgium) - THE European Union on Tuesday approved bank rescue measures for many of the continent's major economic powers, clearing the way for cash injections and loan guarantees expected to help lenders through the financial crisis.

In separate decisions, EU Competition Commissioner Neelie Kroes approved bank rescue measures for Germany, Britain, Spain and Italy, arguing that quick reactions from national governments was key to containing the crisis.

'In the current financial crisis it is important to address the liquidity problems,' said Mr Kroes of the Spanish plan to guarantee credit operations of banks battling the crisis.

In October, the Spanish government said it would guarantee up to euro100 billion ($202 billion) in bank bond issuance this year. The EU Commission said it approved the scheme because it was nondiscriminatory and limited in time.

One of Europe's biggest financial stories over the past decade, Spain's economy has stumbled badly this year, due largely to a collapse in its key construction industry and tighter credit policies at banks.

Italy decided to shore up the country's financial system in October. It committed to guarantee bank deposits of up to euro103,000 and said it was prepared to recapitalise banks by buying up preference shares without voting rights.

The overall budget of the Italian plan is to be up to euro20 billion. Mr Kroes said the scheme 'provides effective means of strengthening confidence in the markets and, above all, of financing the real economy in a period of crisis.' Mr Kroes's office also approved the latest modifications to a British scheme, which had already obtained EU backing.

In Germany, the EU approved a guarantee package for the NordLB regional bank to cover its midterm refinancing needs.

Earlier Tuesday, the EU also cleared a Latvian state plan to stabilise its banking markets.

For years the fastest growing in the 27-member European Union, Latvia's economy is now the worst performer, leaving its financial sector under heavy stress.

In November, the Latvian government was forced to nationalise Parex Bank - the country's second-largest financial institution in terms of assets - after the bank ran out of cash. The government bought a 51 per cent stake in Parex and then injected some 200 million lats (S$562 million) into the bank to keep it afloat. -- AP