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Germany clinches bank rescue deal Germany clinches bank rescue deal
(about 1 hour later)
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. Germany's finance ministry has agreed a 50bn euro ($70bn; £40bn) plan to save one of the country's biggest banks.
The news comes after Chancellor Angela Merkel said she would do all she could to save faltering Hypo Real Estate. The deal, reached with private banks, to save Hypo Real Estate is worth 15m euros more than the first rescue attempt, which fell apart on Saturday.
The government and the banks have found an extra 15bn euros after the collapse of a previous rescue plan. Germany earlier announced an unlimited guarantee for all private savings, in a bid to restore investors' confidence.
Meanwhile, French giant BNP Paribas has confirmed reports it is to take over parts of the troubled Fortis bank. Meanwhile, French giant BNP Paribas has confirmed it has agreed to take over parts of ailing 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. The Iceland government, meanwhile, is also working overnight to try to shore up its entire banking system.
"No client or depositor [at Fortis] will end up in problems due to the financial crisis," said Mr Leterme. We tell all savings account holders that your deposits are safe. The federal government assures it Angela Merkel
The Iceland government is also working overnight to try to shore up its entire banking system. Earlier, German Chancellor Angela Merkel moved to reassure German savers that all their deposits would be safe.
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. Similar unilateral guarantees issued by the Irish and Greek governments last week were criticised in Berlin and other European capitals.
"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. "With this mutually agreed solution, [Hypo Real Estate] will be stabilised and with it, Germany strengthened as a place to conduct finance in difficult times," Germany's 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.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.""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. But BBC business editor Robert Peston says it not completely clear if this amounts to a 100% government guarantee of all German savings deposits.
He says that if it is, other EU states - including the UK - would have to follow suit.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. The 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.
'Irresponsible' Banks strained
On Saturday, leaders of Europe's four biggest economies - Germany, France, Britain and Italy - decided against a co-ordinated US-style bank bail-out, while vowing to stabilise markets.
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.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". Ms Merkel said bank managers had to be held accountable
Late on Sunday, French bank BNP Paribas confirmed that it had agreed to buy 75% of Belgium and Luxembourg holdings of the giant Fortis financial group, creating one of Europe's biggest savings banks.
The governments of Belgium and Luxembourg will in return take a minority stake in BNP Paribas.
The Dutch arm of Fortis has been nationalised by the Netherlands government.
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.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.
'Irresponsible'
Ms Merkel said that managers at financial institutions should be held accountable for "irresponsible behaviour".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. Finance Minister Peer Steinbrueck accused Hypo Real Estate's managers of misleading the government over the true extent of bank's troubles.
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.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. The BBC's Tristana Moore in Berlin said that the German move would be an undoubted relief for investors and sends an important message to the German public that banks will not be allowed to go under.
Analysts say the question remains as to how the markets will react when they open on Monday morning.
The initial signs were not encouraging as share-trading in Australia and New Zealand opened in decline.