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BERLIN: Germany sealed a public-private rescue plan for the country's fourth biggest bank Sunday as the government extended a blanket guarantee for all personal bank deposits to avert panic withdrawals.
On a turbulent day in Europe's biggest economy, the new 50-billion-euro (US$68-billion) lifeline for stricken bank Hypo Real Estate (HRE) was agreed in crisis talks between the government, the Bundesbank central bank, market regulators and the banking sector.
Chancellor Angela Merkel's government had scrambled to reach an accord before Asian markets opened Monday, fearing the ultimate collapse of HRE and heavy downward pressure on all German banking shares.
"With this mutually agreed solution, the institution will be stabilised and with it, Germany strengthened as a place to conduct finance in difficult times," the finance ministry said in a statement after the emergency meeting.
Sunday's deal came hours after Merkel and Finance Minister Peer Steinbrueck announced an unlimited guarantee for all personal savings and checking accounts.
The move was aimed to shore up confidence amid a spreading global financial crisis, in a country in which failing banks bring up particularly bitter memories of the 1930s Great Depression, which helped the Nazis rise to power.
In a bid to head off a run on banks, Finance Minister Peer Steinbrueck assured that German account holders need not worry about losing a "single euro" in the crisis.
"This is to give a signal so citizens do not run to their banks and savings and loans tomorrow to withdraw their money," he said of the guarantee.
Finance ministry spokesman Torsten Albig told business daily Handelsblatt that the estimated value of the guaranteed accounts would total 568 billion euros.
HRE set off shockwaves Saturday when it said that an original 35-billion-euro bailout stitched together in late September had collapsed after a banking consortium withdrew from the plan.
Merkel told reporters earlier Berlin was "pulling out all the stops" to save HRE, fearing unforeseeable consequences if the bank failed.
"The government says today that we will not allow an institution's crisis to become a crisis for the entire system," the conservative leader said.
Hitting back at accusations that the government is preparing to bail out fat cats at average citizens' expense, Merkel warned that "those who did irresponsible business will be held accountable".
"We owe that to the taxpayers in Germany," she said.
Steinbrueck said there were no plans boost the original state contribution to the bailout plan - 26 billion euros - and said he was "quite appalled" HRE's management had not revealed the extent of its liquidity crisis earlier.
But he said the government was obliged to act "because 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."
Under the new deal, the private sector will make up the remaining 15 billion euros.
The rescue came after the leaders of France, Germany, Britain and Italy gathered in Paris Saturday to pledge a more coordinated approach to prevent the meltdown in US financial markets from engulfing their own economies.
While the four powers put on a united front, there was no talk of a joint bail-out fund for European banks on the model of the US$700-billion US package approved Friday, after the idea was shot down by London and Berlin.
Despite assurances that Germany was prepared to cope with the financial crisis, one minister could not resist an alarmist take on the gathering storm.
Interior Minister Wolfgang Schaeuble warned in a magazine interview released Saturday that the global financial crisis could have political repercussions, noting that Adolf Hitler rose to power following the 1929 Wall Street crash.
"We learned from the worldwide economic crisis of the 1920s (and 1930s) that an economic crisis can result in an incredible threat for all of society," he was quoted as saying in an advance copy of Der Spiegel's Monday edition.
"The consequences of that depression was Adolf Hitler and, indirectly, World War II and Auschwitz."
- AFP/yb
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