It has been revealed that UK Prime Minister Gordon Brown pledged to assure 21.3 billion pounds ($31 billion) of UK loans to companies, as European leaders recognized the failure of bank bailouts and spending plans to include the downturn.

According to Brown’s plan, coming the day after German Chancellor Angela Merkel announced a similar 100 billion-euro ($133 billion) fund, underscores the emergency of reviving credit to limit unemployment and maintain consumer spending.

It has been revealed that Brown guarantees UK loans in new effort to deal with downturn in the economy effectively. This happens as European leaders acknowledged the breakdown of bank bailouts and spending plans to include the recession.

According to Peter Dixon, an economist at Commerzbank AG in London, “What governments in Europe are seeking knowledge is that you have to take action, because if you permit the market to take its course, the consequences could be really dire.” “This is the mood we are in at the moment, to grab huge amounts of bad liabilities in the private sector onto the public-sector balance sheet.”

Federal Reserve Chairman Ben Bernanke revealed that spending and tax slashes alone won’t be adequate to encourage economies as bank write downs worldwide approach $1 trillion. With the UK loans benchmark interest rate at its lowest since the 1694 origin of the Bank of England, Brown may be impelled to entail a direct role in financial policy, via supposed “quantitative easing,” where authorities pump money into the economy by strengthening bank reserves.

“Financial actions are not likely to promote a lasting recovery unless they are escorted by strong measures to further alleviate and strengthen the monetary system,” Bernanke said. “More capital injections and assurance may turn out to be essential to make sure constancy and the stabilization of financial markets.”

Both Brown and Merkel, face elections within 18 months and the health of their economies will assist to find out their fate. German federal elections are scheduled for September while Brown must call a vote by June 2010.

Brown has already set up a 50 billion-pound bank recapitalization program and taken over Royal Bank of Scotland Plc, extensive 250 billion pounds of credit lines to banks and provided voters a 20 billion-pound package of mostly tax slashes.

“There is a sense people have been laying faith in Gordon Brown’s capability to handle the economy through the critical situation,” stated by Andrew Cooper, a pollster at Populus Ltd. in London. “If he can’t deliver, the position he has made for himself with voters collapses.”