Germany clinches bank rescue deal
Posted by admin on 5 October, 2008 under Business news | 
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The German government and banks have agreed a 50bn euro ($70bn; £40bn) plan to save one of the country’s biggest banks, the finance ministry says.
The news comes after Chancellor Angela Merkel said she would do all she could to save faltering Hypo Real Estate.
The government and the banks have found an extra 15bn euros after the collapse of a previous rescue plan.
Meanwhile, French giant BNP Paribas has confirmed reports it is to take over parts of the troubled Fortis bank.
Belgian Prime Minister Yves Leterme says the governments of Belgium and Luxembourg will in turn take a blocking minority share in BNP Paribas, according to the AP news agency.
“No client or depositor [at Fortis] will end up in problems due to the financial crisis,” said Mr Leterme.
The Iceland government is also working overnight to try to shore up its entire banking system.
“We tell all savings account holders that your deposits are safe. The federal government assures it” Angela Merkel
Earlier, Ms Merkel moved to reassure German savers that all their deposits would be safe.
“With this mutually agreed solution, the institution [Hypo Real Estate] will be stabilised and with it, Germany strengthened as a place to conduct finance in difficult times,” the finance ministry said.
After an emergency meeting with the central bank earlier, Ms Merkel said: “We will not allow the distress of one financial institution to distress the entire system. For that reason, we are working hard to secure Hypo Real Estate.
“We tell all savings account holders that your deposits are safe. The federal government assures it.”
But BBC business editor Robert Peston says it is unclear if this is a 100% government guarantee of all savings deposits.
He says that if it is, other EU states – including the UK – would have to follow suit.
Ms Merkel has previously been strongly critical of the Irish and Greek governments’ decisions to take independent action to protect all savings deposits.
‘Irresponsible’
The problems of Hypo Real Estate have put further strain on other financial institutions, which are struggling against a crisis of confidence in the global financial system.
Late on Sunday, French bank BNP Paribas confirmed that it had taken control of the holdings in Belgium and Luxembourg of the giant Fortis financial group, creating “the leading European bank in terms of deposits”.
Iceland’s government is also reported to be considering a $14bn (£8bn) injection into the banking system, having bailed out the country’s third largest bank, Glitnir, last week.
Ms Merkel said that managers at financial institutions should be held accountable for “irresponsible behaviour”.
Finance Minister Peer Steinbrueck said he was “appalled” that the problems at Hypo had not been revealed earlier.
He has accused the bank’s managers of misleading the government by failing to reveal the extent of the problem.
But he said Berlin would do all it could to prevent the bank’s collapse, to avoid “incalculably large” damage to Germany and financial services providers in Europe.
British chancellor Alistair Darling has said he is ready to take “pretty big steps that we wouldn’t take in ordinary times” to assist the British economy.
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