Subscribe to Print Edition | Mon., October 06, 2008 Tishrei 7, 5769 | | Israel Time: 10:51 (EST+7)
Haaretz israel news English
web haaretz.com
  Back to Homepage
Haaretz Toolbar
Diplomacy
Defense Jewish World Opinion National
Print Edition
Car Rental
Books Haaretz Magazine Business Real Estate Easy Start Travel Week's End Anglo File
Last update - 10:51 06/10/2008
European countries ramp up deposit protection as stocks slump
By The Associated Press
Tags: EU, Economy, Financial Crisis 

Nordic countries Denmark and Sweden moved Monday to bolster protection of bank accounts as stock exchanges across Europe opened lower and central banks pumped more money to cash-starved banks.

In Copenhagen, the Economy Ministry said commercial lenders had agreed to contribute up to 35 billion kroner, or about $6.4 billion, over two years to a fund that will help insure account holders from losses.

In neighboring Sweden, the government said it would raise the limit for deposit insurance to 500,000 kronor ($71,000) from 250,000 kronor ($35,500).
Advertisement
"The measure is about ensuring that bank customers have continued confidence in the financial system," finance minister Anders Borg and capital markets' minister Mats Odell said in a joint statement.

The decisions come after Germany sought Sunday to allay fears about the financial meltdown, enhancing a rescue plan for Hypo Real Estate AG and guaranteeing private bank accounts.

Chancellor Angela Merkel said Sunday that no citizens should fear for the safety of their investments. Hours later, her government announced a new bailout package totaling 50 billion ($69 billion) for Hypo Real Estate, Germany's second-biggest commercial property lender.

Hypo said an original 35 billion ($48 billion) rescue plan fell apart after private lenders withdrew support, a key element to the proposal, which had already been approved by the EU.

The German bailout deal was on top of the guarantees of private accounts. German Finance Ministry spokesman Torsten Albig said the unlimited guarantee covered some 568 billion ($785 billion) in savings and checking accounts as well as time deposits, or CDs.

At the same time, Belgian Prime Minister Yves Leterme said that France's BNP Paribas SA had committed to taking a 75 percent stake in Fortis NV.

Leterme said the Belgian and Luxembourg governments would, in turn, take a
blocking minority share in BNP Paribas.

The deal came after two days of closed-door talks between the Paris-based bank, Fortis and government authorities in an effort to restore confidence in the company before markets open Monday.

The efforts appeared to have little effect on markets, with European exchanges from Oslo to Frankfurt opening lower Monday. The Vienna Stock Exchange plunged 8.4 percent at the opening bell, the biggest drop since May 2005. In Frankfurt, the DAX was down 4 percent and in Paris, the CAC-40 fell 4.3 percent. In Oslo, shares were down nearly 6 percent.

In Iceland - particularly hard-hit by the credit crunch - government officials decided, after marathon talks over the weekend, not to offer an economic package to shore up the country's banks.

The European banking industry is feeling the wind of default blowing from the other side of the Atlantic, said Axel Pierron, senior vice president at Celent, a Boston, Massachusetts, based financial research and consulting firm.

The erosion has also injured overall confidence and caused concern among investors, politicians and the European public.

The leaders of Germany, France, Britain and Italy met Saturday to discuss the meltdown that has leaped across the Atlantic from the U.S. to Europe. But they shied away from action on the scale of the massive $700 billion bailout passed by the U.S. Congress on Friday and signed into law by President George W. Bush.

The failure to agree to an EU-wide plan illustrated the divisions in Europe on how to deal with the crisis.

France had suggested a multibillion-euro (multibillion-dollar) EU-wide government bailout plan, but backed off after Germany said banks must find their own way out.

Icelandic banks expanded rapidly after deregulation of the domestic financial market in the 1990s and now have combined foreign liabilities in excess of 100 billion ($138 billion) - dwarfing the tiny country's gross domestic product of 14 billion ($19 billion).

The government last week took over Iceland's third-largest bank, Glitnir, a decision that prompted major credit ratings agencies to downgrade both Iceland's four major banks and its government credit rating.

Looming large was a growing sense that the Federal Reserve and Europe's major central banks - which have been flooding euros and dollars to banks that have grown increasingly unwilling to lend money even to themselves - were ready to institute emergency cuts to their benchmark interest rates this week.

None of the banks, including the European Central Bank and Bank of England, have commented on potential rate hikes or cuts. But analysts believe the Bank of England, which meets this Thursday, will likely lower its rate below 5 percent. The ECB left its rate unchanged at 4.25 percent on Thursday, but opened the door to a rate cut.

On Monday, the ECB injected another $50 billion into money markets while the BoE added another $10 billion. The Swedish Central Bank increased its lending to 100 billion kronor ($14.2 billion).

Robert Brusca, chief economist at the New York-based Fact and Opinion Economics, said if the ECB does issue such a cut it would be a sign that they're really, really scared.


Related articles:
  • Economic woes put a strain on coalition negotiations
  • Tel Aviv markets plummet across the board as TA-25 plunges 6.3%
  • Politicians try to calm fears
    • Bookmark to del.icio.us  
     
    Forgotten peace
    French FM: I fear distracted world may forget Mideast peace process.
    Settlers vs. Shin Bet
    Daniela Weiss: Shin Bet behind attack on left-wing advocate prof. Sternhell.
     Read & React
    Burston: Obama-hate, and Sarah Palin's War on Terror
    Responses: 5
    Amir Oren: Nuclear deterrence attributed to Israel doesn't affect its enemies' plans
    Responses: 2
    Livni to France's Kouchner: I oppose Olmert's peace plan
    Responses: 49
    U.S. Jewish group recruits former Israeli defense officials for pro-Obama ad
    Responses: 29
    Editorial: Livni mustn't decide to strike Iran out of a desire for prestige
    Responses: 3


    More Headlines
    10:05 Livni tells France's Kouchner: I oppose Olmert's peace plan
    08:18 PA forces foil suicide bombing bid by Hebron terrorists
    10:43 Obama-hate, and Sarah Palin's War on Terror
    07:25 Economic woes put a strain on coalition negotiations
    10:43 Hamas funds being transferred to Israeli Arabs, documents reveal
    10:39 Top Israeli defense officials star in pro-Obama ad
    08:22 Afraid of setting precedent, IDF delays letting woman visit father's grave
    05:24 Report: Dutch thought Anne Frank House 'not worth saving'
    08:26 Foreign Ministry, PR firm rebrand Israel as land of achievements
    02:54 Livni, Barak advisers could be big winners in coalition talks
    05:00 Gaydamak's fraud, arms trafficking trial starts today in Paris
    02:03 As Kinneret recedes, drivers pull cars up to new water line
    08:30 High school to begin late as teachers strike for drivers education course
    21:49 NGO appeals decision to hand over J'lem compound to Russia
    Previous Editions
    Special Offers
    Advertisement
    Fattal Hotel Chain
    Perfectly located hotels on best resorts of Israel.
    Dial 013 for your long-distance calls
    and get all your money back
    US CITIZENS
    Vote for real change. Request your ballot today!
    Eldan Rent a Car
    Israel's leading car rental company offers you a 20% discount on all online reservations
    Jewish Singles Personal Ads
    Find the love of your life on JDate.com
    Israel's Premier Real Estate Website
    www. israel-property.com
    Hebrew Summer courses
    From $39.95
    Junkyard
    Junk a car - get free towing nationwide and a tax-deductible receipt
    Home | TV | Print Edition | Diplomacy | Opinion | Arts & Leisure | Sports | Jewish World | Underground | Site rules |
    Real Estate in Israel | Travel to Israel with Haaretz | Hotels Israel | Restaurants Israel | Tourist attractions Israel | Shops Israel
    birthright Israel | Search engine marketing
    Haaretz.com, the online edition of Haaretz Newspaper in Israel, offers real-time breaking news, opinions and analysis from Israel and the Middle East. Haaretz.com provides extensive and in-depth coverage of Israel, the Jewish World and the Middle East, including defense, diplomacy, the Arab-Israeli conflict, the peace process, Israeli politics, Jerusalem affairs, international relations, Iran, Iraq, Syria, Lebanon, the Palestinian Authority, the West Bank and the Gaza Strip, the Israeli business world and Jewish life in Israel and the Diaspora.
    © Copyright  Haaretz. All rights reserved