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Europe rushes to save failing banks

STOCKHOLM: Governments across Europe scrambled to save failing banks on Sunday, working largely on their own a day after leaders of the continent’s four biggest economies called for tighter regulation and coordinated response to the global meltdown.

The German government held crisis talks after the collapse of a ballyhooed €35-billion bailout of Hypo Real Estate AG, the country’s second biggest property lender. German Chancellor Angela Merkel said Europe’s biggest economy would “not allow the distress of one financial institution to distress the entire system.”

In Iceland — particularly hard-hit by the credit crunch — government officials and banking chiefs were discussing a possible rescue plan for overstretched commercial banks. Belgian Prime Minister Yves Leterme said he aims to find a new owner for troubled bank Fortis NV to restore confidence in the company before the opening of markets on Monday. Mr. Leterme said government officials were going over a takeover bid for Fortis’ Belgian operations. The bank’s Dutch operations were nationalised amid fears they could go insolvent.

British Treasury chief Alistair Darling said he was ready to take “pretty big steps that we wouldn’t take in ordinary times” to help the country in weather the credit crunch. In the past year, the government has acted to nationalise struggling mortgage lenders Northern Rock and Bradford & Bingley.

Mr. Darling told the BBC that the government, which has provided billions in support to the banking sector, that it was “important to take generalised action as well as being ready to take particular action if you get a particular problem with an individual bank.”

“The European banking industry is feeling the wind of default blowing from the other side of the Atlantic,” said Axel Pierron, senior vice-president at Celent, a financial research and consulting firm. On Saturday, the leaders of Germany, France, Britain and Italy met to discuss the growing meltdown which has leapfrogged across the Atlantic from the U.S. to Europe, but shied away from the massive $700-billion bailout passed by the U.S. Congress a day earlier that U.S. President George W. Bush signed into law. — AP

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