G.O.O.D

Source: Bloomberg.com

European governments from Brussels to Copenhagen to Berlin rushed to shore up their faltering banks as the credit crunch worsened in Europe.

BNP Paribas SA agreed to buy Fortis’s units in Belgium and Luxembourg for 14.5 billion euros ($19.8 billion) after a government rescue failed, while the German state and financial institutions put together a 50 billion-euro rescue package for Hypo Real Estate Holding AG. Denmark and Germany said they will guarantee all their countries’ bank deposits.

Financial shares tumbled in European trading on concern the hurried actions will fail to unlock bank lending. The leaders of Europe’s four biggest economies were unable to agree on joint responses at an Oct. 4 meeting, pledging instead to work together to limit the economic fallout, ease accounting rules, and seek tougher financial regulations.

The governments’ plan for individual action “is a failure,” said Pio De Gregorio, head of equity research and trading at Centrobanca SpA in Milan. “This is a systemic crisis and it warrants a systemic solution. We need a European fund that will recapitalize banks.”

The escalation in the cost of rescuing Hypo Real Estate and Fortis, just a week after the initial bailouts were announced, also undermined confidence, analysts said.

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Source: MarketWatch

The German government moved to back Hypo Real Estate with a 50 billion euro rescue plan Sunday evening according to published reports. The move came a day after the embattled lender said an earlier 35 billion euro rescue had fallen through. German Chancellor Angela Merkel Sunday also moved to guarantee deposits held in German banks.

Source: FT.com

Hypo Real Estate was racing to find a way to save itself on Sunday after the German property lender revealed the collapse of a previous rescue plan.

A consortium of banks that was to provide HRE with an emergency liquidity line had now declined to do so, HRE said at the weekend.

The reversal threatens a dramatic escalation of the financial crisis in Germany and leaves HRE and the Berlin government scrambling to come up with an alternative plan before markets open on Monday.

The government had been an integral part of a €35bn package agreed last week to support the group, which was unable to find enough short-term unsecured finance to support borrowing needs at Depfa, its Irish public sector lending arm.

A failure of HRE, with its €400bn balance sheet, would be the biggest threat to the German financial system of the current crisis. Peer Steinbruck, finance minister, justified the government’s intervention to support HRE by warning that its collapse could badly affect the real economy.

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