From The Times
October 6, 2008

Every country for itself as European unity collapses in an attack of jitters
Germany became the latest EU member to put its national interest first by announcing its own guarantee for bank deposits

Roger Boyes

Germany shattered any semblance of European unity on the global credit crisis last night by announcing that it was ready to guarantee €568 billion of personal savings in domestic accounts.

The move – which came as Berlin announced a new rescue package for an ailing mortgage bank – is sure to anger France, which, holding the European Union presidency, tried to create the illusion of a common front at a weekend summit in Paris. Instead, the message coming loud and clear from Berlin is that it is every man for himself. Or as President Nicolas Sarkozy would prefer not to say:sauve qui peut.

The massive liquidity crisis in the banking system has already nudged the Irish Republic and Greece into unilateral – and probably illegal under EU law – action to guarantee the deposits in national banks. Faced with a choice between the possible collapse of their banking systems and violating EU competition rules, the two countries opted for what they saw as the lesser evil. Now Germany, which at the weekend rejected French plans for an EU lifeboat fund, has taken the decisive protective step, and it is said to be plain that other European states will have to follow suit.

Early today the Danish Government guaranteed all bank deposits in Denmark as part of a deal with banks to set up a liquidation fund. There had been a ceiling on the guarantee.

Yesterday Peer Steinbrück, the German Finance Minister, said of his own country’s move: “This is an important signal to calm the situation and head off disproportionate reactions, and which would make our crisis management or crisis prevention even more difficult.â€