Oct

6

Germany Vows to Back Private Bank Accounts

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Chancellor Angela Merkel sought to calm depositors’ fears by announcing that Germany would guarantee all private bank accounts. The assurance came in the wake of a deepening credit crisis in Europe as many banks and financial institutions teeter on the brink of collapse brought on by the US market meltdown.

The German Chancellor had been to Paris to attend an emergency meet of European leaders concerned at the worsening situation of credit market in the continent. A day after returning from the meet, Merkel addressed a hastily-arranged press conference in which she reassured depositors that all private bank accounts would be guaranteed by the government. The announcement came in the wake of renewed attempts by government officials to rescue a blue-chip lender after its initial bail-out plan failed.

The German government has been shaken by the collapse of a $50 billion plan to salvage Hypo Real Estate, a major commercial property financier after its liabilities were discovered to be worse than initial estimates. The government has now reached an agreement with private lenders to raise $63 billion for rescuing the beleaguered lender. According to the deal the government will come up with $37 billion while the rest of the bail-out amount would be pooled in by private bankers.