Only the state can restore trust to financial markets now, German Chancellor
Angela Merkel was quoted as saying on Sunday amid reports that Berlin was about
to unveil a huge rescue package for its banks.
"Only action by the
state is capable of restoring the necessary trust," Merkel was quoted as saying
by the Bild am Sonntag weekly following talks on Saturday in France with
President Nicolas Sarkozy.
"In this it is important that countries
do not act unilaterally but that we coordinate at European and international
level and then implement the measures within our national responsibilities,"
"We are not doing it in the interest of the banks but
in the interests of people," she told the paper.
Her comments came
as the clock ticked down for leaders from the 15 nations of the eurozone and
Britain meeting in Paris to hammer out a coordinated rescue package that would
reassure investors before markets opened on Monday.
No details have
yet been released, but there were signs that the 15 were leaning towards the
policy already adopted in Britain under which the state guarantees inter-bank
lending and buys stakes in banks.
In Germany, Europe's biggest
economy, press reports said that following the meeting in Paris Merkel's
government would announce a rescue package worth several hundred billion euros
for its banks.
A government spokesman in Paris said that the
chancellor would make a "political statement" in the French capital at around
4:45 pm (1445 GMT) before discussing Germany's plans with the other European
Berlin is expected to guarantee interbank loans with
between 300 and 400 billion euros (405-540 billion dollars) and to provide banks
with fresh capital in exchange for shares in the banks, similar to the partial
nationalisation plan announced in Britain last week, the reports said.
A week ago 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 though a dramatic
deterioration of German banks' liquidity shortages, as markets have tumbled in
the past week and short-term lending among banks has become even more difficult
to come by, has forced a re-think in Berlin.
According to the Welt
am Sonntag newspaper the capital injection alone would total more than 50
billion euros, while Handelsblatt reported that as much as 100 billion euros
would be made available to stricken banks.
It also became 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, the reports said.
Sources in Berlin said that Merkel's
cabinet would discuss the package on Monday with a view to it going through
parliament and becoming law by the end of the week -- an aim that is far from
certain in view of MPs' misgivings.
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