Germany guarantees private bank savings
Europe divided on how to deal with financial crisis
Last Updated: Sunday, October 5, 2008 | 7:54 PM ET
The Associated Press
German Chancellor Angela Merkel, left, and Finance Minster Peer Steinbrueck give a statement in Berlin on Sunday after Germany joined Ireland and Greece in guaranteeing all private bank accounts. (Rainer Jensen/AP)Germany joined Ireland and Greece on Sunday in guaranteeing all private bank accounts, putting Europe's biggest economy at odds with calls for a unified European response to the global financial meltdown.
The decision came as governments across Europe scrambled to save failing banks, working largely on their own a day after leaders of the continent's four biggest economies called for tighter regulation and a co-ordinated response.
Chancellor Angela Merkel said that no citizen should fear for the safety of their investments.
German Finance Ministry spokesman Torsten Albig said the unlimited guarantee covered some $785 billion US (€568 billion) in savings and chequing accounts as well as time deposits, or CDs.
Ministry officials said later Sunday that the government and private banks had also agreed to a new $69-billion US (€50-billion) deal to bail out Hypo Real Estate AG, the country's No. 2 commercial property lender. The announcement came at the end of crisis talks, after an earlier deal intended to save the bank had fallen apart Saturday.
In Iceland — particularly hard-hit by the credit crunch — government officials and banking chiefs were discussing a possible rescue plan for the country's overstretched commercial banks.
Belgian Prime Minister Yves Leterme said he aims to find a new owner for troubled bank Fortis NV to restore confidence in the company before the opening of markets on Monday.
Leterme told two media outlets government officials were going over a takeover bid for Fortis's Belgian operations. The bank's Dutch operations were nationalized amid fears they could go insolvent.
British Treasury chief Alistair Darling said he was ready to take "pretty big steps that we wouldn't take in ordinary times" to help the country weather the credit crunch.
In the past year the government has nationalized struggling mortgage lenders Northern Rock and Bradford & Bingley.
"The European banking industry is feeling the wind of default blowing from the other side of the Atlantic," said Axel Pierron, senior vice-president at Celent, a Boston-based financial research and consulting firm.
The erosion has also injured overall confidence and caused concern among investors, politicians and the European public.
The leaders of Germany, France, Britain and Italy met Saturday to discuss the meltdown that has leapfrogged across the Atlantic from the U.S., but shied away from action on the scale of the massive $700-billion US bailout passed by the U.S. Congress on Friday and later signed into law by President George W. Bush.
Their failure to agree to an EU-wide plan showcased the divisions in Europe on how to deal with the crisis.
France had suggested a multibillion-dollar, EU-wide government bailout plan, but backed off after Germany said banks must find their own way out.
