Paris - The French government is due to present its bank rescue plan after an extraordinary cabinet meeting later Monday, reports said.

The most important aspect of the plan will be the measures undertaken to prod banks to lend each other money. To that end, euro-zone leaders decided late Sunday to have states provide guarantees for interbank trades.

Paris is likely to create a new mechanism guaranteeing bank debt in exchange for certain collateral.

The French government is also expected to establish a new authority for state investment that will support the capital resources of troubled financial institutions.

Its first measure, already agreed, will be to take on 5.7 per cent of the struggling French-Belgian financial services group Dexia.

The authority will also be able to purchase convertible loans from banks that it will either sell back at a later time or, if the bank still needs the capital, transform them into shares in the bank.

The French Parliament is slated to discuss the plan this week with a vote expected by Friday.