In Germany, officials on Sunday launched the biggest bank rescue in the country's history. They also decided to give Germans a federal guarantee for all their private bank savings. Chancellor Angela Merkel announced the measures after a late-night emergency meeting with Finance Minister Peer Steinbrueck and the country's senior bank officials.
The German government arranged to -- together with other banks -- bail out Hypo Real Estate, the country's fourth-largest bank, with a $68 billion package.
While the German government pledged to prevent HRE from going under, Merkel warned that heads will be rolling. "Those who managed their company in an irresponsible way will have to stand up for it," she said.
In a bid to calm down Germans and prevent them from running to their banks to withdraw their savings, Merkel promised Germans "that their savings are safe." Steinbrueck said the guarantee for personal savings is worth anywhere between $900 billion and $1.6 trillion.
"It's an important signal to calm down the situation and prevent reactions that would be disproportionate and that would make our crisis management even more difficult," Steinbrueck said.
The measures in Germany came after Merkel and the leaders of France, Britain and Italy in a Sunday emergency meeting in Paris decided to improve coordination in tackling the financial crisis. The team did not, however, agree to French plans for an European Union-wide bailout fund for European banks. French President Nicolas Sarkozy did not manage to pull Merkel to his side. The German chancellor maintains the position that national governments should help their banks on a national level. Proponents of the French proposal say an EU-wide emergency plan should be drafted to at least be prepared for a worst-case scenario.
Across the continent, governments have reacted differently to the crisis.
The Irish government has already guaranteed the security of private savings, and governments in Britain, Greece and Sweden have increased governmental savings insurance.
French bank BNP Paribas on Sunday agreed to take over Fortis' operations in Belgium and Luxembourg, after the governments of both countries had sought a buyer for the bank that was partly nationalized last week.
Meanwhile, all over Europe Monday stock markets took a beating.
British stock index FTSE 100 also lost roughly 8 percent and reached a four-year low, with mainly bank shares under pressure. HBOS, the Royal Bank of Scotland and Barclays faced double-digit stock losses.
In Germany, the DAX plummeted by nearly 8 percent to 5,300 points, its lowest value in more than two years. HRE shares, despite the bailout, lost over 30 percent.
German financial experts behind the scenes expect more banks to be sucked into the maelstrom of the global crisis. German newsmagazine Der Spiegel reported that several regional state-owned banks are in trouble because of investments in U.S. real estate, or loans for HRE and already defunct Lehman Brothers. Once two or three banks are in trouble, the entire system may crumble, worried analysts say.
The German government nevertheless has resisted calls from some banking officials to create a national emergency fund for all banks that are sucked into the crisis; Berlin will decide on a "case-by-case basis" whether to help ailing banks with taxpayers' money, Steinbrueck said.
And some banks, such as Deutsche Bank, the country's largest, are still relatively stable. Deutsche Bank can fall back on large cash reserves it has accumulated over the past years, and it has resisted investing in many of the most risky loans that have pulled other banks near the brink of collapse.
Moreover, the German economy still is pretty strong -- the many small and midsized enterprises work for a strong economic backbone that can ward off a series of crises. For October, German economic experts have even predicted another period of job growth. The number of Germans without jobs will fall to under 2.9 million, the lowest level since 1992 -- but it would be naive to expect much more good news in the months to come.