Europe scrambles to save faltering banks

STOCKHOLM, Sweden — Germany became the latest country to move to allay fears about the financial meltdown, enhancing a rescue plan for Hypo Real Estate and guaranteeing private bank accounts as European governments scrambled on their own Sunday to save failing banks.

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

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

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

At the same time, Belgian Prime Minister Yves Leterme said France's Paribas had committed to taking a 75-percent stake in Fortis. He said the Belgian and Luxembourg governments would, in turn, take a blocking minority share in Paribas.

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

In Iceland — particularly hard-hit by the credit crunch — government officials and banking chiefs were discussing a possible rescue plan for the country's overstretched commercial banks.

In Tokyo trading early today, the euro slid to a 13-month low against the dollar, dropping to $1.3648. The 15-nation currency fell to the lowest in more than two years versus the yen.

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

Information from Bloomberg News

is included in this report.