GERMAN RESPONSE:THE GERMAN government has strenuously denied an apparent suggestion by the finance minister on national radio that it is working on a "Plan B" to shore up banks and their liabilities.
The Frankfurt stock exchange fell to its lowest level in two years yesterday despite the last-minute €50 billion guarantee for Hypo Real Estate and the announcement of a state guarantee for all German bank deposits - worth more than an estimated €1 trillion.
Finance minister Peer Steinbrück stoked speculation when he said that Berlin had a "Plan B in the drawer" to manage the banking crisis by "opening an umbrella so that we don't stumble from one case to the next".
"We are aware that we will not get far with singular solutions," he said on national radio.
Until now, despite three bank bailouts, Berlin has rejected an all-purpose bank guarantee such as that unveiled in Dublin last week.
Finance ministry spokesmen forcefully denied that Mr Steinbrück's talk of an "umbrella" for the banking sector meant an Irish style bailout.
They do admit, however, that the government will have to consider whether it needs to take another approach to the financial crisis.
"There is no plan B. We are merely giving some thought to the future if more individual bank cases come up," said a spokesman, "Whether we continue to act in an ad hoc way or whether or actions should go beyond that, no one knows what the future will bring."
German sources insisted that the guarantee announced on Sunday would only apply to the savings of private individuals. Initial expectations of the scale of the guarantee for German citizens, among Europe's most diligent savers, have ballooned and now top €1 trillion.
Unofficially, Berlin announced the state guarantee after receiving information from the European Central Bank that there had been an increase in withdrawals from German banks.
"The banks aren't lending each other any money, so if people pulled out their money too, it could be fatal," said one senior official who asked not to be named.
Berlin says the state guarantee would act as a support for existing deposit guarantee funds operated by German banks.
