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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Secret_Agent_Man who wrote (41267)	10/13/2008 1:53:54 PM
From: elmatador	Respond to of 218131

Germany adopts 500 bln euro bank rescue package BERLIN, Oct 13 (Reuters) - Chancellor Angela Merkel's cabinet approved a banking rescue package worth up to 500 billion euros ($679.3 billion) on Monday, seeking to restore confidence and order to Germany's battered financial sector. The package comprised up to 400 billion euros in bank guarantees and as much as 100 billion euros in state funds -- sums that together almost equal Germany's annual tax take. "Today we have established a first building block for new financial market conditions," Merkel told a news conference. "We have one goal -- (the plan) should help to create new confidence, between banks, in the economy and among citizens." Earlier the euro <EUR=> rose against the dollar on news the cabinet had approved the plan, which Merkel said should come into effect on Friday after parliament has passed it. Germany's DAX leading share index <.GDAXI> also rose strongly on Monday after falling last week to a 3-year low, and was trading 11.4 percent higher by 1545 GMT. Germany initially pledged help for banks on a case-by-case basis, but changed course and decided to adopt a sector-wide plan after the financial crisis hit fever pitch last week. Of the plan's 100 billion euros in state funds, a maximum of 80 billion would be available for recapitalisations and 20 billion was set aside as a provision for the guarantee offer. "We think that is absolutely realistic," Finance Minister Peer Steinbrueck said of the 20 billion euros earmarked as a provision for the 400 billion euros guarantee. "We in Germany are still not experiencing a credit crunch. But one cannot rule it out," he added at a news conference. Steinbrueck said economic conditions in Germany, Europe's largest economy, would be worse next year than this. The economy contracted in the second quarter of 2008 and another contraction in the third quarter would put it in a technical recession. GREATER CONFIDENCE Bundesbank President Axel Weber said the package provided a solid foundation for stabilising Germany's financial sector and would encourage banks to lend to each other again. "The banks can now lend each other money again with greater confidence, because the state is securing the institutes and their business via capital measures and guarantees," the head of the German central bank said in a statement. The package will set up a "financial market stabilisation fund" to strengthen the capital base of institutions, which will be in place until the end of 2009. The fund could take on risky positions acquired by banks before Oct. 13, 2008. The plan also gives the Finance Ministry power to influence decisions in a bank's strategy, including over the composition of its equity capital and its dividend policy. Steinbrueck said he wanted to cap the pay of executives at banks that used the rescue fund. "These managers should not receive more than 500,000 euros per year," he said. "And no bonuses. And no severance deals. And no dividends." German bank guarantees would run until Dec. 31, 2009 under the plan -- in line with guidelines agreed on Sunday by European leaders, who pledged that any solvent institution would get public funding if needed. Merkel, who joined the other European leaders at the weekend meeting to show they were tackling the financial crisis together, said a new financial market framework was needed. "We must now together, as an international community, draw the right consequences. In my view, this includes strengthening the International Monetary Fund's role in the supervision of financial institutions," she said. Copyright