Open

Coming up

Don't miss

Replay


LATEST SHOWS

MEDIAWATCH

No strategy and a beige suit

Read more

THE WORLD THIS WEEK

The World This Week - 29 August 2014 (part 2)

Read more

THE WORLD THIS WEEK

The World This Week - 29 August 2014

Read more

ENCORE!

Alain Choquette: A Hilarious Magician in Paris

Read more

FOCUS

France welcomes Iraqi Christian refugees

Read more

FRANCE IN FOCUS

Emmanuel Macron: A new economy minister with a pro-business agenda

Read more

THE OBSERVERS

More of this year's best Observers stories

Read more

#TECH 24

Changing the world, one video game at a time

Read more

IN THE PAPERS

Socialist Party summer conference kicks off in explosive atmosphere

Read more

  • Exclusive: Fabius warns of further sanctions against Russia

    Read more

  • Experimental Ebola drug ‘ZMapp’ heals all monkeys in study

    Read more

  • IMF stands behind Lagarde amid French corruption probe

    Read more

  • Ukraine to relaunch NATO membership bid

    Read more

  • Suriname leader’s son pleads guilty to courting Hezbollah

    Read more

  • British killer escapes from French psychiatric hospital

    Read more

  • Chelsea’s Torres set for AC Milan switch

    Read more

  • Police hunt for British boy with brain tumour taken to France

    Read more

  • France shines in IMF list of world’s promising economists

    Read more

  • Mapping Ukraine: Canada and Russia in ‘tweet for tat’ row

    Read more

  • First case of Ebola confirmed in Senegal

    Read more

  • Obama has 'no strategy yet' on potential Syria strikes

    Read more

  • Netflix to woo French with ‘House of Cards’ set in Marseille

    Read more

  • French businesses ‘hoping for a new Thatcher’

    Read more

  • Syrian refugees surpass 3 million, UN says

    Read more

  • West backs Ukrainian claims of Russian incursion

    Read more

  • Libyan PM resigns as Islamists set up rival administration

    Read more

  • UN says 43 peacekeepers captured in Golan Heights

    Read more

  • The deleted tweets of Manuel Valls

    Read more

  • Peru seizes record 6.5 tonnes of Europe-bound cocaine

    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)