Germany working on UK-style bank rescue plan

The German government is working on a British-style rescue plan for its financial sector which could involve guarantees of over 100 billion euros (78 billion pounds) and a large capital injection, reuters reported.

A coalition party source confirmed the essence of a report in Die Welt newspaper which said the government was considering a major rescue package based on the British model.

"What Die Welt is reporting is not incorrect," the source, who is familiar with government deliberations, told Reuters.

Finance Minister Peer Steinbrueck confirmed the government was working on a comprehensive plan, although he said it was too early to offer any details of what it might look like.

"The government is preparing to take some concrete action," Steinbreuck told ARD television in an interview from Washington but he repeatedly declined to elaborate.

"No, it's too early to speculate about that," Steinbrueck said when asked about the newspaper report.

"What's accurate is this -- that I'm convinced that in Germany we cannot continue going from one crisis ... to another like in the last week but instead we need a comprehensive solution. That's being worked on now," he said.

The conservative daily Die Welt reported the government was considering offering the sector interbank guarantees worth "triple-digit" billions or direct loans. It is also mulling the injection of equity capital in "double-digit" billions.

In exchange, the government would take stakes in banks, the daily said, adding the cabinet is due to decide on the plan in the next few days.

Steinbrueck declined to comment when asked if that meant German banks would be nationalised.

"By Monday at the latest we'll have to have a signal to calm things down, a signal to win back credibility and confidence in Germany," he said, adding there would be "very rigid requirements placed upon those we would be helping."

Earlier, Chancellor Angela Merkel's spokesman Ulrich Wilhelm said the government has not yet made any political decisions on whether it will launch a new rescue package, although he said it was examining all options.

"It's the duty of the government to be prepared and to examine every conceivable option to protect its citizens and economy from damage," Wilhelm said.

"No political decisions have yet been made," he added. "The G7 finance ministers are discussing the issue and different options in Washington," he said, referring to ministers and central bankers of the top seven industrial nations who are discussing the crisis at a biannual meeting in Washington.

Die Welt noted that some members of Merkel's Christian Democrats were strongly opposed to the idea.

Britain has set aside at least 50 billion pounds to help banks boost their capital but said there is no obligation on banks to use the money and they can raise capital privately.

Britain's plan also guarantees interbank lending by some 250 billion pounds to help unfreeze markets and extends a Bank of England scheme that swaps banks' risky assets for government debt to provide 200 billion pounds of cash to the system.

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