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Germany clinches bank rescue deal Germany clinches bank rescue deal
(about 3 hours later)
Germany's finance ministry has agreed a 50bn euro ($70bn; £40bn) plan to save one of the country's biggest banks.Germany's finance ministry has agreed a 50bn euro ($70bn; £40bn) plan to save one of the country's biggest banks.
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 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.
Germany earlier announced an unlimited guarantee for all private savings, a move followed later by Denmark. Germany earlier announced an unlimited guarantee for all private savings, and Denmark later followed suit.
Meanwhile, French giant BNP Paribas has confirmed it has agreed to take over parts of ailing Fortis bank. The steps brought little comfort to Asian markets, where Tokyo's Nikkei index tumbled 3.6% to a four-year low.
The Icelandic government, meanwhile, has been working through the night to try to shore up its entire banking system. The South Korean currency also fell nearly 5%, hit by foreign currency shortages.
The country's banks have now agreed measures to stabilise its financial system, where last week the currency fell by a fifth against the dollar. Monday saw the first session of the Asian markets since the US agreed a $700bn (£394bn) rescue plan for its beleaguered financial sector on Friday.
We tell all savings account holders that your deposits are safe. The federal government assures it Angela MerkelWe tell all savings account holders that your deposits are safe. The federal government assures it Angela Merkel
Germany's finance ministry said that with the "mutually agreed solution" Hypo Real Estate would be stabilised, and "Germany strengthened as a place to conduct finance in difficult times". The problems of Hypo Real Estate have put further strain on other financial institutions struggling against a crisis of confidence in the global financial system.
Earlier, German Chancellor Angela Merkel moved to reassure German savers that all their deposits would be safe. French giant BNP Paribas confirmed on Sunday night it had agreed to buy 75% of Belgium and Luxembourg holdings of the giant Fortis financial group.
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.
And the Icelandic government agreed measures for the country's banks to sell off some foreign assets in a bid to shore up its entire financial system.
Iceland's currency last week plummeted by a fifth against the dollar and the government was forced to bail out the country's third largest bank, Glitnir.
'Irresponsible behaviour'
Berlin's finance ministry said it had acted to stop Hypo Real Estate's collapse in order to avoid "incalculably large" damage to Germany and financial services providers in Europe.
European governments are as dazed and confused by the mayhem in the global banking system as most of the rest of us Robert PestonBBC business editor Peston's view: Lost in translationSend us your commentsIceland shores up economy German Chancellor Angela Merkel said managers at financial institutions should be held accountable for "irresponsible behaviour".
Earlier, she moved to reassure German savers 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.Similar unilateral guarantees issued by the Irish and Greek governments last week were criticised in Berlin and other European capitals.
But 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. But after an emergency meeting with the central bank, Ms Merkel said: "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." There was more gloom in early trading in the Asian financial markets
BBC business editor Robert Peston said the UK Treasury was attempting to clarify the details of Germany's guarantee to savers. The BBC's Tristana Moore in Berlin says Germany's move will relieve investors and send an important message to the German public that banks will not be allowed to go under.
If the move does amount to a 100% government guarantee of all German savings deposits, other EU states - including the UK - would have to follow suit, says our correspondent. BBC business editor Robert Peston said the UK Treasury was attempting to clarify the details of Germany's guarantee.
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. If the move does amount to blanket cover for all German savings deposits, other EU states - including the UK - would have to follow suit, says our correspondent.
Banks strained Denmark's government announced just after midnight it would also guarantee all deposits, after its banks agreed to pay into a liquidation fund to take over distressed banks.
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. Deposits in Danish banks have in the past been guaranteed up to 300,000 crowns ($55,000; £31,000).
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 UK finance minister, Alistair Darling, has said he is ready to take "pretty big steps that we wouldn't take in ordinary times" to help the British economy.
Ms Merkel said bank managers had to be held accountable On Saturday, leaders of Europe's four biggest economies - Germany, France, Britain and Italy - stopped short of a co-ordinated US-style bank bail-out but vowed to stabilise markets.
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.
'Irresponsible'
Ms Merkel said that managers at financial institutions should be held accountable for "irresponsible behaviour".
Finance Minister Peer Steinbrueck accused Hypo Real Estate's managers of misleading the government over the true extent of bank's troubles.
European governments are as dazed and confused by the mayhem in the global banking system as most of the rest of us Robert PestonBBC business editor Peston's view: Lost in translationSend us your commentsIceland shores up economy 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.
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.