Brussels -- The European Union may have a common market and a common currency, supported by a common monetary policy but its jumbled response to the global credit crunch shows that it still lacks a common financial policy.

The governments of Belgium, Luxembourg, Germany, Greece, Ireland, Britain and the Netherlands have so far adopted ad-hoc approaches to bank rescues and savings protection.

But as the ramifications of the US-born financial crisis become increasingly alarming, there are growing calls for a major re-think of the way EU member states should protect their economies.

"The current approach of rescuing one institution after another with national funds will lead to a Balkanization of the European banking sector," wrote 10 leading economists in an open letter to European leaders last week. "Unless Europe's leaders immediately unite to address this crisis head-on before it spirals out of control, they may find themselves fighting over how best to salvage the aftermath."

The letter was compiled by Daniel Gros and Stefano Micossi of the Centre for European Policy Studies (CEPS), a Brussels-based think tank. It was addressed to the leaders of the four EU members -- Britain, France, Germany and Italy -- of the powerful Group of Eight (G-8) who met in Paris on Saturday.

Leaders at the G-8 summit vowed to support Europe's troubled financial institutions but this also infuriated other EU leaders who felt excluded.

On Tuesday, all of the bloc's 27 finance ministers will have a chance to debate the crisis together at a meeting in Luxembourg. Every sign is that they will shun the advice of CEPS' economists and opt for evolution, rather than revolution.

Diplomats say ministers will reaffirm their wish to better coordinate their economic and financial policies.

But experience suggests that when it comes to the crunch, cultural differences and national egotism all too often risk undermining any calls for unity.

A French initiative for a US-style European 300-billion-euro (415-billion-dollar) liquidity injection fund, for instance, was shot down by complaints that individual governments should be left to decide how to spend taxpayers' money.

And attempts by the European Commission to better regulate banks and insurance companies have run into opposition from those member states that do not wish to see Brussels impose its own rules on their financial sectors or undermine their national regulators.

Another proposal up for discussion in Luxembourg, reduced VAT rates for labor-intensive industries such as restaurants and hotels, will also likely be delayed because of a lack of unanimity among member states.

Additional topics on the ministers' agenda include ways to counter stalling economic growth and rising oil prices.

They are also set to debate the question of executive pay, as public opinion increasingly turns against corporate high-flyers, who are perceived as too often sacrificing the long-term interests of their company for a quick profit.

However, ministers are not expected to call for any new EU legislation. Rather, they will ask each other to ensure that company pay packages are discussed with shareholders and based on long-term performance criteria.

Tuesday's talks are to be preceded by a traditional evening meeting restricted to the 15 EU countries that share the euro.

-- Nicholas Rigillo/Ben Nimmo/DPA/Expatica