PM plea over small business lending

Mr Brown and Chancellor Alistair Darling said the new money from the European Investment Bank (EIB) could make a significant difference if it is passed on as loans to struggling companies by the banks.

Business groups welcomed the announcement - Britain's estimated share of a £24 billion cross-Europe package - but called for assurances that the money will filter down to small and medium-sized enterprises (SMEs), which have complained of lenders stopping credit facilities and hiking up interest rates in recent months.

And EIB officials cautioned that the money available to British SMEs depends entirely on how much of the cash UK banks apply for. The £24 billion on offer over the next four years is available to banks from any EU state.

Welcoming the package, Mr Brown said: "We must continue to encourage banks to lend. Having recapitalised the banks, we must ensure that the money is used to sustain credit lines on normal terms to solvent businesses.

"I urge banks not to change the terms and charges for existing lending to small and medium-sized enterprises."

The PM was speaking after talks with German Chancellor Angela Merkel in Downing Street, where they agreed to co-operate in seeking international financial reform at key meetings of EU leaders in Brussels on November 7 and global leaders in Washington on November 15.

Meanwhile, hopes of further interest rate cuts were boosted as Mr Darling made clear the Bank of England was free to reduce the base rate below 4.5% at next week's Monetary Policy Committee meeting, following its half-point cut in October.

Mr Darling stopped short of advocating a cut, but said Governor Mervyn King was "acutely aware" of his responsibility to support the wider economy as well as to target inflation.

Details of the new loan package were unveiled by Mr Darling as he met banks in the City of London along with Business Secretary Lord Mandelson and EIB president Philippe Maystadt.