EUROPE 
Germany guarantees all private savings accounts
Monday, 6 October, 2008
German Chancellor Angela Merkel. (AAP)
European leaders are trying to shore up battered domestic banks and settle a row over how best to guarantee savers' deposits as the EU's 27 finance ministers prepared to meet in Luxembourg.
Germany, which refused to countenance French suggestions of a US-style bailout fund for the EU-bloc, put pressure on fellow European leaders when it extended a blanket guarantee to all private bank deposits.
VIDEO: Merkel guarantees deposits
VIDEO: European leaders vow to fight
IN-DEPTH: Finance news
"We tell all savings account holders that your deposits are safe. The federal government assures it," German Chancellor Angela Merkel told reporters.
This was an abrupt u-turn after its criticism of Ireland when it offered a guarantee for all private savings accounts last week.
Germany's move puts pressure on EU leaders
Many European nations offer only limited guarantees for savers' deposits -- some as low as 20,000 euros (27,000 dollars).
But they are under increasing pressure to follow Germany's lead now and guarantee all private bank deposits to reassure investors fearful for their savings amid the financial crisis.
British opposition politicians said Sunday action was "unavoidable", while the Treasury said it was considering its response to the German move.
"Germany is Europe's economic superpower. Where it leads, others are bound to follow." said the leader of Britain's third party the Liberal Democrats, Nick Clegg.
Austria's government said it will decide Wednesday whether to follow in Germany's footsteps and raise the state's guarantee on bank deposits, the finance minister said in a television interview Sunday.
50-billion-euro rescue package for Hypo
On Sunday Merkel said the German government was also "pulling out all the stops" to save stricken Hypo Real Estate (HRE) after a banking consortium withdrew from a 35-billion-euro (48-billion-dollar) rescue plan late Saturday.
The German government, the Bundesbank central bank and market regulators agreed with the banking sector later in the day on a new 50-billion-euro rescue package for stricken bank Hypo Real Estate, the finance ministry said.
On top of a public-private deal last month to extend a 35-billion-euro credit line to Germany's fourth biggest bank, the financial sector will offer an additional 15 billion euros, the ministry said.
But hitting back at accusations that Berlin is preparing to bail out fat cats at average citizens' expense, she warned that "those who did irresponsible business will be held accountable.
"We owe that to the taxpayers in Germany," Merkel added.
German Finance Minister Peer Steinbrueck said HRE had an "unforeseen liquidity gap in the billions" of euros range, but said Berlin would do what it could to avert its collapse.
He warned that the "damage, not only for the Federal Republic of Germany, but also for many European financial services providers who are interlinked with us, would be incalculably large."
BNP Paribas takes over Fortis
Elsewhere, the Luxembourg and Belgium governments reached a deal with French bank BNP Paribas to take over operations in their countries of the troubled Fortis finance group, which both countries partially nationalised last week. The Dutch government completely nationalised Fortis' operations in the Netherlands.
BNP Paribas confirmed that it had taken control of Fortis's arms in Belgium and Luxembourg to create the "leading European bank in terms of deposits."
The pressure is on the EU's 27 finance ministers to find some unity when they sit down to hammer out the nitty-gritty details of Saturday's agreement between Berlin, London, Paris and Rome at their talks in Luxembourg this week.
Spain, the EU's fifth-largest economy, underlined disquiet from those not invited to Saturday's mini-summit in Paris, when France, Germany, Britain and Italy promised a more coordinated approach to the credit crunch, but Merkel insisted states would mainly act individually.
Calls for a 'European solution' to the crisis
Economy Minister Pedro Solbes said in an interview that "the solution to problems faced by financial institutions because of the global financial crisis must be 'European' and not just 'national'."
France, following a call for more flexibility on regulation despite European Commission competition rules, said it was not seeking to duck its EU public finance obligations.
Commission head Jose Manuel Barroso welcomed the pledge by Europe's main economies to work together on the global credit crisis as a "step in the right direction," in remarks published Sunday.
But Europe's press was split over a summit accord by the EU's top four economies on battling the global finance crisis, hailing a powerful message of unity or dismissing it as too little too late.
The EU powers hope to win backing for their accord at a summit of all 27 members on October 15-16, following meetings this week of the Eurogroup and Ecofin EU finance ministers' group in Luxembourg.
In Lisbon, Portuguese Finance Minister Fernando Teixeira dos Santos warned all 27 members must have their say in forging a European strategy, in a note published by Lusa news agency.
"All contributions are welcome to ensure European financial markets get quickly back to normal. The conclusions of the meeting of four European countries on Saturday must therefore be debated by all member states."
Source: AFP
Germany, which refused to countenance French suggestions of a US-style bailout fund for the EU-bloc, put pressure on fellow European leaders when it extended a blanket guarantee to all private bank deposits.
VIDEO: Merkel guarantees deposits
VIDEO: European leaders vow to fight
IN-DEPTH: Finance news
"We tell all savings account holders that your deposits are safe. The federal government assures it," German Chancellor Angela Merkel told reporters.
This was an abrupt u-turn after its criticism of Ireland when it offered a guarantee for all private savings accounts last week.
Germany's move puts pressure on EU leaders
Many European nations offer only limited guarantees for savers' deposits -- some as low as 20,000 euros (27,000 dollars).
But they are under increasing pressure to follow Germany's lead now and guarantee all private bank deposits to reassure investors fearful for their savings amid the financial crisis.
British opposition politicians said Sunday action was "unavoidable", while the Treasury said it was considering its response to the German move.
"Germany is Europe's economic superpower. Where it leads, others are bound to follow." said the leader of Britain's third party the Liberal Democrats, Nick Clegg.
Austria's government said it will decide Wednesday whether to follow in Germany's footsteps and raise the state's guarantee on bank deposits, the finance minister said in a television interview Sunday.
50-billion-euro rescue package for Hypo
On Sunday Merkel said the German government was also "pulling out all the stops" to save stricken Hypo Real Estate (HRE) after a banking consortium withdrew from a 35-billion-euro (48-billion-dollar) rescue plan late Saturday.
The German government, the Bundesbank central bank and market regulators agreed with the banking sector later in the day on a new 50-billion-euro rescue package for stricken bank Hypo Real Estate, the finance ministry said.
On top of a public-private deal last month to extend a 35-billion-euro credit line to Germany's fourth biggest bank, the financial sector will offer an additional 15 billion euros, the ministry said.
But hitting back at accusations that Berlin is preparing to bail out fat cats at average citizens' expense, she warned that "those who did irresponsible business will be held accountable.
"We owe that to the taxpayers in Germany," Merkel added.
German Finance Minister Peer Steinbrueck said HRE had an "unforeseen liquidity gap in the billions" of euros range, but said Berlin would do what it could to avert its collapse.
He warned that the "damage, not only for the Federal Republic of Germany, but also for many European financial services providers who are interlinked with us, would be incalculably large."
BNP Paribas takes over Fortis
Elsewhere, the Luxembourg and Belgium governments reached a deal with French bank BNP Paribas to take over operations in their countries of the troubled Fortis finance group, which both countries partially nationalised last week. The Dutch government completely nationalised Fortis' operations in the Netherlands.
BNP Paribas confirmed that it had taken control of Fortis's arms in Belgium and Luxembourg to create the "leading European bank in terms of deposits."
The pressure is on the EU's 27 finance ministers to find some unity when they sit down to hammer out the nitty-gritty details of Saturday's agreement between Berlin, London, Paris and Rome at their talks in Luxembourg this week.
Spain, the EU's fifth-largest economy, underlined disquiet from those not invited to Saturday's mini-summit in Paris, when France, Germany, Britain and Italy promised a more coordinated approach to the credit crunch, but Merkel insisted states would mainly act individually.
Calls for a 'European solution' to the crisis
Economy Minister Pedro Solbes said in an interview that "the solution to problems faced by financial institutions because of the global financial crisis must be 'European' and not just 'national'."
France, following a call for more flexibility on regulation despite European Commission competition rules, said it was not seeking to duck its EU public finance obligations.
Commission head Jose Manuel Barroso welcomed the pledge by Europe's main economies to work together on the global credit crisis as a "step in the right direction," in remarks published Sunday.
But Europe's press was split over a summit accord by the EU's top four economies on battling the global finance crisis, hailing a powerful message of unity or dismissing it as too little too late.
The EU powers hope to win backing for their accord at a summit of all 27 members on October 15-16, following meetings this week of the Eurogroup and Ecofin EU finance ministers' group in Luxembourg.
In Lisbon, Portuguese Finance Minister Fernando Teixeira dos Santos warned all 27 members must have their say in forging a European strategy, in a note published by Lusa news agency.
"All contributions are welcome to ensure European financial markets get quickly back to normal. The conclusions of the meeting of four European countries on Saturday must therefore be debated by all member states."
Source: AFP
