Germany guarantees all savings
Monday, 06 Oct 2008 10:29
Angela Merkel offers savings protection
The German government will guarantee all private savings accounts, as the country's second largest mortgage lender struggles for survival.
Last night Germany's finance ministry agreed €50 billion deal to save Hypo Real Estate after a £28 billion rescue plan collapsed late on Saturday.
German chancellor Angela Merkel - after attending an emergency meeting of financiers and government representatives in an effort to try to broker a new deal to save the bank from collapse – announced protection for savers.
She said: "We tell all savings account holders that your deposits are safe. The federal government assures it."
This is despite the German leader previously being strongly critical of the Irish and Greek governments' decisions to take independent action to protect all savings deposits.
However, the exact nature of the guarantee – and if it is as hard and fast as Irish protection – still remains uncertain.
Denmark and Austria have now both added saver guarantees amid the banking crisis hitting the continent.
Sweden has extended its cover of savers.
In the UK on Friday protection was lifted to £50,000 and £100,000 for joint accounts – meaning 98 per cent of bank customers are covered.
However, Alistair Darling is now under pressure to extend this – especially if the German protection is as cast iron as suggested – to stop funds running out of the UK.
The news that the deal to save Hypo had fallen through came only hours after the leaders of the four largest economies in Europe met on Saturday to agree greater cooperation between their governments to combat the financial crisis.
The leaders came out of the meeting saying they had agreed on a number of actions to be implemented, said to include sanctions against the bosses of banks that failed. But they said they were not prepared to go as far as a US style rescue package.
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."