STOCKHOLM - GERMANY became the newest European country to allay fears about the financial meltdown, boosting a rescue plan for Hypo Real Estate AG and guaranteeing private bank accounts as governments scrambled on their own to save failing banks.

Euro drops to 13-month low FRANKFURT - THE euro slid to a 13-month low against the dollar on Monday after European leaders came away from a weekend meeting without announcing a bailout plan for the continent's troubled financial sector. The 15-nation euro bought US$1.3606 (S$1.9882), down from the US$1.3863 it bought in late New York trading Friday. It was last that low in early September 2007. ... more

Chancellor Angela Merkel said that no citizen should fear for the safety of their investments. Hours later, her government announced a new bailout package totaling 50 billion euro (S$99 billion) for Hypo Real Estate, Germany's second-biggest commercial property lender.

Hypo said its original 35-billion-euro rescue plan had fallen apart after private lenders withdrew support, a key element to the proposal that had already been approved by the EU.

The deal was on top of the guarantees of private accounts. German Finance Ministry spokesman Torsten Albig said the unlimited guarantee covered some 568 billion euros in savings and checking accounts as well as time deposits, or CDs.

At the same time, Belgian Prime Minister Yves Leterme said that France's BNP Paribas SA had committed to taking a 75 per cent stake in Fortis NV.

Mr Leterme said the Belgian and Luxembourg governments would, in turn, take a blocking minority share in BNP Paribas.

The deal came after two days of closed-door talks between the Paris-based bank, Fortis and government authorities in an effort to restore confidence in the company before markets open on Monday.

In Iceland - particularly hard-hit by the credit crunch - government officials and banking chiefs were discussing a possible rescue plan for the country's overstretched commercial banks.

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 weather the credit crunch.

In the past year the government has nationalised struggling mortgage lenders Northern Rock and Bradford & Bingley.

'The European banking industry is feeling the wind of default blowing from the other side of the Atlantic,' said Mr Axel Pierron, senior vice-president at Celent, a Boston, Massachusetts-based financial research and consulting firm.

The erosion has also injured overall confidence and caused concern among investors, politicians and the European public.

The leaders of Germany, France, Britain and Italy met Saturday to discuss the meltdown that has leapfrogged across the Atlantic from the US to Europe, but shied away from action on the scale of the massive US$700 billion (S$1 trillion) bailout passed by the US Congress on Friday and later signed into law by President George W. Bush.

Their failure to agree to an EU-wide plan showcased the divisions in Europe on how to deal with the crisis.

France had suggested a multibillion euro EU-wide government bailout plan, but backed off after Germany said banks must find their own way out.

French President Nicolas Sarkozy's top adviser, Mr Claude Gueant, insisted that a 'common European plan' had come out of the summit.

'What is certain and what the citizens of France and Europe must know is that their (banking) establishments won't be left in difficulty,' he told Europe-1 radio on Sunday.

Icelandic banks expanded rapidly after deregulation of the domestic financial market in the 1990s and now have combined foreign liabilities in excess of 100 billion euros, dwarfing the tiny country's gross domestic product of 14 billion euros.

The government last week took over Iceland's third-largest bank, Glitnir, a decision that prompted major credit ratings agencies to downgrade both Iceland's four major banks and its government credit rating.

Looming large was a growing sense that the Federal Reserve and Europe's major central banks - which have been flooding euros and dollars to banks that have grown increasingly unwilling to lend money even to themselves - were ready to institute emergency cuts to their benchmark interest rates this week.

None of the banks, including the European Central Bank and Bank of England, have commented on potential rate hikes or cuts.

But analysts believe the Bank of England, which meets this Thursday, will likely lower its rate below 5 per cent. The ECB left its rate unchanged at 4.25 per cent on Thursday, but opened the door to a rate cut.

Mr Robert Brusca, chief economist at the New York-based Fact and Opinion Economics, said that the ECB does issue such a cut it would a be a sign 'that they're really, really scared'. -- AP

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