Germany guarantees all private savings accounts

05 October 2008

Germany will guarantee all private savings accounts. The announcement was made after an emergency meeting with the central bank and financial regulator on the possible Hypo Real Estate rescue plan which collapsed shortly after being agreed.

German Chancellor Angela Merkel has announced that Germany will guarantee all private savings accounts. Her announcement was made after an emergency meeting with the central bank and financial regulator on the possible Hypo Real Estate rescue plan which collapsed shortly after being agreed on Friday.

 

“We will not allow the distress of one financial institution to distress the entire system. For that reason, we are working hard to secure Hypo Real Estate”, Merkel said in a TV interview together with Finance Minister Peer Steinbrueck.

 

The HRE rescue plan collapsed after it was revealed that the 35 billion Euro guarantee will not be sufficient and some 15 billion Euro more might be needed for the year 2009, plus an additional 10 to 50 billion later on.

 

Competition issues

 

Ireland already drew criticism among some European countries by promising to guarantee all deposits in Irish banks, prompting some depositors in Britain to move savings to branches of Irish banks.

 

Competition Commissioner Neelie Kroes told Dutch TV on Sunday there was a discriminatory element to unlimited guarantees on bank deposits and that she expected Ireland to modify its guarantee plans.

 

"A guarantee without limits is not allowed ... (we expect) that it will be brought into a form for which we can together state that it is in line with the treaty," she said.

© Graham Bishop