Open

Coming up

Don't miss

Replay


LATEST SHOWS

THE WORLD THIS WEEK

The World This Week - 01 August 2014 (part 2)

Read more

MEDIAWATCH

Coverage of Gaza in the Israeli media

Read more

REPORTERS

1914-1918: The Depths of Hell

Read more

THE WORLD THIS WEEK

The World This Week - 01 August 2014

Read more

THE INTERVIEW

Exclusive: Israel's US ambassador speaks to FRANCE 24

Read more

#THE 51%

World War One: The war that changed women’s lives

Read more

FRANCE IN FOCUS

Ségolène Royal goes for green

Read more

THE OBSERVERS

A look back at some of the Observers' best stories

Read more

DEBATE

Argentina Defaults: Kirchner Cries Foul Over 'Vulture Funds' (part 2)

Read more

  • Israeli soldier feared captured, ceasefire 'over'

    Read more

  • Exclusive: Israel's US ambassador speaks to FRANCE 24

    Read more

  • Air France ground workers to strike on August 2

    Read more

  • Rogue general denies Islamist seizure of Benghazi

    Read more

  • Ugandan court strikes down anti-gay legislation

    Read more

  • 1914-1918: The Depths of Hell

    Read more

  • Regional summit to tackle deadly Ebola outbreak

    Read more

  • French hospital to open wine bar for terminally ill patients

    Read more

  • Video: Tipping is dying out in French café culture

    Read more

  • €2.5 million in cocaine ‘disappears’ from Paris police HQ

    Read more

  • Appeal court keeps French rogue trader Kerviel in jail

    Read more

  • Interactive: France’s new plan to counter jihadism in Africa

    Read more

  • Ukrainian army suffers losses in separatist attack

    Read more

  • Argentinian markets plummet following default

    Read more

  • French Jews speak of growing fear in Paris amid Gaza conflict

    Read more

Germany unveils 480 billion euro bank rescue package

Latest update : 2008-10-14

The German Chancellor presented a rescue package that will provide 400 billion euros ($543.4 billion) in bank guarantees and a further 80 billion euros in state funds to recapitalise banks.


Germany unveiled Monday a 480-billion-euro rescue package to save its banks from collapse after European leaders hammered out a common approach at a high-stakes Paris summit at the weekend.
   
The finance ministry in Europe's biggest economy said the package included 80 billion euros (108 billion dollars) in fresh capital for stricken banks and some 400 billion euros (545 billion dollars) in loan guarantees.
   
The measures, in line with others being prepared by other European governments following Sunday's emergency summit in Paris, were approved on Monday by Chancellor Angela Merkel's cabinet.
   
Finance Minister Peer Steinbrueck was scheduled to give more details at 3:30 pm (1330 GMT) and the government hopes for the package to become law later this week.
   
"Without a functioning financial system the access of individuals and companies to credit is destroyed," the finance ministry said in a statement.
   
The proposals, hammered out in consultation with the German central bank, the financial regulator and representatives from the banks, are aimed at "stabilising the financial market, ensuring the supply of capital to the German economy and providing security for savers and investors," it said.
   
"Such unusual market conditions call for unusual measures," it said. "It is not just about protecting banks and other financial institutions but also about protecting citizens."
   
"The government is convinced that dealing with the current dangers takes priority, so that trust in our financial system can be assured," it added.
   
In return for the capital injection the German state is expected to take stakes in the banks in a partial nationalisation similar to plans announced in Britain, which other eurozone countries also plan to copy.
   
Berlin also wants to relax accounting rules so that banks can delay writing off the value of an asset on its books as soon as it falls, to improve regulation and to make managers more accountable.
   
Last week Berlin put together a 50-billion-euro rescue of Hypo Real Estate, the country's fourth biggest bank, but this took the form of guaranteeing badly needed credit lines rather than the state taking a stake in the stricken commercial property lender.
   
Now, however, a drying up of the amount of liquidity held by German banks -- as markets have tumbled in the past week and short-term lending has become even harder to secure -- has forced a re-think in Berlin and across Europe.
   
It has also become clear that the worst hit are not private German banks like Deutsche Bank but the Landebanks, the regional lending powerhouses that are owned by Germany's 16 states, according to press reports.
   
Merkel has been at pains to stress, however, that the rescue package is not a blank cheque and that banks in future will face much tougher regulatory scrutiny.
   
Taxpayers "have the right to expect that if they are contributing to the stability of the financial system that this will be honoured," Merkel said in Paris on Sunday.
   
By shoring up Germany's banks, Merkel's government is attempting not only to calm stock markets -- Frankfurt's DAX lost more than a fifth of its value last week -- but also to stop panic bank withdrawals by consumers and to prevent the crisis spreading to other sectors of the economy.
   
"We are not doing it in the interest of the banks but in the interests of people," Merkel was quoted as saying over the weekend.
  

Date created : 2008-10-13

COMMENT(S)