Financial crisis: Germany announces savings guarantee
A 100 per cent guarantee on all savings is being considered by the Treasury after Germany took the surprise step of announcing a blanket guarantee on private deposits in its banks.
By Robert Winnett and Nick Allen
Last Updated: 8:42PM BST 05 Oct 2008
The German move, which followed the lead of the Irish government last week, led to suggestions that Alistair Darling, the Chancellor, could effectively be forced to announce a similar guarantee as early as Monday.
Gordon Brown has so far resisted such a move, but Liberal Democrat leader Nick Clegg said Germany's action made it "completely unavoidable".
"Germany is Europe's economic superpower. Where it leads, others are bound to follow," Mr Clegg said. (AtW's comment: and how come it is not the City that is the economic superpower?
)
"Ireland's action last week to guarantee all deposits made a common European approach to deposit guarantees necessary. Germany's decision makes it completely unavoidable."
Treasury officials were last night urgently studying the details of German chancellor Angela Merkel's announcement, as it weighed up whether to follow suit. It came just a day after an EU summit at which Germany, France, the UK and Italy had agreed to co-operate on measures to tackle the financial crisis.
Ireland's earlier move - which was later followed by Greece - had already been widely criticised. Mrs Merkel had been among the critics. However, over the weekend it emerged that Hypo Real Estate, Germany's second biggest commercial property lender, was in trouble after a 35bn euro ($48bn; £27.2bn) rescue plan had collapsed.
Panicked savers in Britain have already moved billions of pounds from high street banks in the last few days into accounts that offer a 100 per cent guarantee amid fears that other banking institutions could be at risk of collapse.
Last week, Mr Brown announced that the limit on savings guarantee limit would be raised from £35,000 to £50,000 in an attempt to reassure savers.
However, the new upper limit still leaves around £500 billion worth of savings in UK banks unprotected. (AtW's comment: first time I see figure showing deposits above £50k and as expected it is HUGE! Just who the heck Gordon was trying to fool saying 97% of depositors are protected so all is good then?) The few financial institutions in Britain that do offer a 100 per cent guarantee on savings have seen a surge in interest in recent weeks.
The nationalised Northern Rock, National Savings and Investments - the Government's savings scheme - and the Post Office offer are among the few to offer this kind of blanket guarantee
Germany's announcement came just hours after the new Business Secretary Peter Mandelson warned against actions which would "distort" Europe's financial system.
"The danger of this crisis is that it may spark a new wave of economic nationalism, with each country looking for its own 'get out of jail free' card. People have to realise that selective or national approaches could lead markets to look to parts of the financial system in a distorted way," Mr Mandelson warned.
Liberal Democrat Treasury spokesman Vince Cable urged savers not to panic, but said that the Government needed to take "some pretty radical steps" to calm people down following the German decision.
Mr Cable said: "The problem about one European country acting in isolation, as Ireland did and as Germany are now doing, is that it has a 'beggar my neighbour' effect on the rest of Europe.
"I thought at this meeting last week they had come to some sort of understanding to stop this happening.
"People shouldn't be panicking. My money is in the Bank of Scotland and that's rather safer than it would be in an Irish bank underwritten by the Irish Government.
"Nonetheless there is panic, there is uncertainty and the Government is going to have to take some pretty radical steps to calm people down."
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A 100 per cent guarantee on all savings is being considered by the Treasury after Germany took the surprise step of announcing a blanket guarantee on private deposits in its banks.
By Robert Winnett and Nick Allen
Last Updated: 8:42PM BST 05 Oct 2008
The German move, which followed the lead of the Irish government last week, led to suggestions that Alistair Darling, the Chancellor, could effectively be forced to announce a similar guarantee as early as Monday.
Gordon Brown has so far resisted such a move, but Liberal Democrat leader Nick Clegg said Germany's action made it "completely unavoidable".
"Germany is Europe's economic superpower. Where it leads, others are bound to follow," Mr Clegg said. (AtW's comment: and how come it is not the City that is the economic superpower?
)"Ireland's action last week to guarantee all deposits made a common European approach to deposit guarantees necessary. Germany's decision makes it completely unavoidable."
Treasury officials were last night urgently studying the details of German chancellor Angela Merkel's announcement, as it weighed up whether to follow suit. It came just a day after an EU summit at which Germany, France, the UK and Italy had agreed to co-operate on measures to tackle the financial crisis.
Ireland's earlier move - which was later followed by Greece - had already been widely criticised. Mrs Merkel had been among the critics. However, over the weekend it emerged that Hypo Real Estate, Germany's second biggest commercial property lender, was in trouble after a 35bn euro ($48bn; £27.2bn) rescue plan had collapsed.
Panicked savers in Britain have already moved billions of pounds from high street banks in the last few days into accounts that offer a 100 per cent guarantee amid fears that other banking institutions could be at risk of collapse.
Last week, Mr Brown announced that the limit on savings guarantee limit would be raised from £35,000 to £50,000 in an attempt to reassure savers.
However, the new upper limit still leaves around £500 billion worth of savings in UK banks unprotected. (AtW's comment: first time I see figure showing deposits above £50k and as expected it is HUGE! Just who the heck Gordon was trying to fool saying 97% of depositors are protected so all is good then?) The few financial institutions in Britain that do offer a 100 per cent guarantee on savings have seen a surge in interest in recent weeks.
The nationalised Northern Rock, National Savings and Investments - the Government's savings scheme - and the Post Office offer are among the few to offer this kind of blanket guarantee
Germany's announcement came just hours after the new Business Secretary Peter Mandelson warned against actions which would "distort" Europe's financial system.
"The danger of this crisis is that it may spark a new wave of economic nationalism, with each country looking for its own 'get out of jail free' card. People have to realise that selective or national approaches could lead markets to look to parts of the financial system in a distorted way," Mr Mandelson warned.
Liberal Democrat Treasury spokesman Vince Cable urged savers not to panic, but said that the Government needed to take "some pretty radical steps" to calm people down following the German decision.
Mr Cable said: "The problem about one European country acting in isolation, as Ireland did and as Germany are now doing, is that it has a 'beggar my neighbour' effect on the rest of Europe.
"I thought at this meeting last week they had come to some sort of understanding to stop this happening.
"People shouldn't be panicking. My money is in the Bank of Scotland and that's rather safer than it would be in an Irish bank underwritten by the Irish Government.
"Nonetheless there is panic, there is uncertainty and the Government is going to have to take some pretty radical steps to calm people down."
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