Page last updated at 13:33 GMT, Tuesday, 7 October 2008 14:33 UK

EU moves to reassure bank savers

Christine Lagarde: 'We are determined to guarantee stability in our banking system'

European Union finance ministers have agreed to increase the guarantee for customers' bank savings accounts to at least 50,000 euros ($68,250; 38,900).

The ministers reached agreement at emergency talks on the financial crisis in Luxembourg.

They also agreed to support big banks in trouble in order to protect the financial system.

"We have agreed to support systemic financial institutions," deputy German finance minister Joerg Asmussen said.

Until the outbreak of the turmoil in the financial sector, most EU governments guaranteed consumer savings of up to 25,000 euros.

However, several countries wanted to raise the minimum guarantee even higher than 50,000 euros - to 100,000 euros. Countries such as Greece and Ireland have already issued blanket guarantees for savers.

Bank fears

French finance minister, Christine Lagarde, who chaired the meeting, said: "We wanted to find a common position to strengthen our coordination - we have succeeded."

There's a mess in Europe too, because European banks were also seduced over the preceding few years into lending too much too cheaply to consumers and businesses
Robert Peston
BBC business editor

"We have reiterated our determination to guarantee the stability and solidity of the banking system, " she added.

The ministers from the 27 member states hope their measures will bolster money markets after a day of panic on Monday saw huge share index losses in Germany, France and the UK.

A $700bn US bank bail-out and moves by several EU states to help their banks have not quelled fears.

European and Asian markets were volatile on Tuesday as investors worried global government action may not resolve the crisis.

Banking stocks dragged European share markets lower initially, but by early afternoon most indices had reversed earlier falls to edge ahead slightly - the UK's main FTSE 100 index was up 1.2%, while France's Cac 40 was 1.5% higher.

Rescue fund

Since late last week, Ireland, Germany, Greece, Austria and Denmark have declared separately that money held by ailing banks will be safe.

Traders on the New York Stock Exchange floor
Investors have endured a white-knuckle ride in recent weeks.

Analysts say the move had angered fellow EU member states who feared it could prompt savers to transfer their money into guaranteed institutions.

Europe's fragmented response to the crisis has so far has done little to reassure investors, correspondents say.

Across Europe, central banks have already offered more than $74bn in short-term loans to banks in an attempt to make cash available.

But while the idea of a European fund to rescue troubled banks has been floated, it has attracted too little support to go any further, says the BBC's economics correspondent Andrew Walker in Washington.

He also says the financial crisis will come under the microscope at the International Monetary Fund meetings in Washington in the next week.





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