BERLIN:OFFICIALS IN Berlin were last night frantically putting finishing touches to a banking bailout worth a reported €400 billion, a week after dismissing such a plan as unnecessary for Germany's "solid" banks.
The dramatic about-face is expected to include bank guarantees worth about €300 billion and a further €100 billion to recapitalise financial institutions.
"Only action by the state can restore the necessary trust," said the chancellor Angela Merkel yesterday. "We aren't doing this in the interests of the banks but in the interests of the people."
The German leader has attracted unusually harsh criticism at home and abroad for her government's handling of the crisis.
After criticising Ireland's bank guarantee scheme last weekend, Dr Merkel vetoed French suggestions for a pan-European Union solution to the crisis.
Hours later, she went on German television with a promise to guarantee all savings in German banks. Yesterday, a week on, Dr Merkel returned to Paris to extol the "importance of a common approach" to the crisis.
New opinion polls suggest Berlin's promise to guarantee bank deposits did not have the desired trust-building effect.
Two-thirds of Germans said they didn't believe the chancellor could make good on her promise, according to a survey in Der Spiegel magazine. Some 53 per cent felt more anxious and just 28 per cent felt comforted. Last weekend the government agreed a €50 billion bailout for commercial lender Hypo Real Estate.
