The German government and the banking sector agreed on a new €50 billion rescue package for stricken bank Hypo Real Estate, the finance ministry said.
On top of a public-private deal last month to extend a €35 billion credit line to Germany's fourth biggest bank, the financial sector will offer an additional €15 billion, the ministry said.
In a statement the ministry said: ‘With this mutually agreed solution, the institution will be stabilised and with it, Germany strengthened as a place to conduct finance in difficult times.’
Earlier today, Chancellor Angela Merkel said her government was scrambling to salvage the HRE rescue after a banking consortium withdrew from the plan.
HRE's announcement yesterday sent shockwaves through Europe's biggest economy.
The rescue bid was the biggest in German history and came after HRE was sucked into the global financial turmoil through its inability to refinance debt, one of many high-profile European emergency cases in the past two weeks.
Officials had raced to reach an accord before Asian markets opened tomorrow fearing a final collapse of HRE and heavy downward pressure on all German banking shares.
German govt pledges savings guarantee
The German government has offered an unlimited guarantee for all private savings accounts according to a spokesman for the finance ministry.
Earlier the German Chancellor Angela Merkel said all deposits are safe.
Speaking at a joint news conference in Berlin with Finance Minister Peer Steinbrueck, Ms Merkel said managers at financial institutions should be held accountable for what she termed irresponsible behaviour.
So far, four German banks have been bailed out in the wake of the credit market turmoil stemming from the United States.
