EU-DIGEST

GERMANY has made a blanket guarantee to cover all the country's bank savings

GERMANY has made a blanket guarantee to cover all the country's bank savings, piling pressure on other European governments to bolster financial defenses ahead of another week of predicted mayhem on global markets. Governments are also worrying about weak banks with BNP Paribas of France now taking over large chunks of troubled Belgian-Dutch institution Fortis. German Chancellor Angela Merkel made the promise to completely back all savings as a €50 billion ($89 billion) rescue for Hypo Real Estate (HRE), the country's fourth largest bank, was arranged. "Germany is Europe's economic superpower,'' Nick Clegg, leader of the Liberal Democrats, Britain's third party, said. "Where it leads, others are bound to follow. "Ireland's action last week to guarantee all deposits made a common European approach to deposit guarantees necessary. Germany's decision today makes it completely unavoidable.'' Over the next few days European Union finance ministers will seek to flesh out plans for restoring confidence in the crisis-struck banking system after weekend talks among Europe's biggest economic powers.French bank BNP Paribas is to take control of the ailing Fortis' operations in Belgium and Luxembourg in a deal reached late Sunday following intense negotiations through the weekend, a source close to the Luxembourg Government said. BNP Paribas confirmed that it had taken control of Fortis's arms in Belgium and Luxembourg to create the "leading European bank in terms of deposits.''

While officials in Berlin sought to reassure bank customers, one German minister could not resist an alarmist take on the gathering storm in the country. Interior Minister Wolfgang Schaeuble warned in a magazine interview to be published today that the global financial crisis could have political repercussions, noting that Adolf Hitler rose to power following the 1929 Wall Street crash.

Labels: EU Economy, European Bailout, Germany