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EU finance chiefs in crisis talks EU moves to reassure bank savers
(about 1 hour later)
European Union finance ministers are to discuss increasing the guarantees for customers' bank savings accounts. European Union finance ministers have agreed to increase the guarantee for customers' bank savings accounts to at least 50,000 euros ($67,500; £37,000).
They are also debating whether to standardise these savings guarantees, possibly up to 100,000 euros ($135,000; £77,000) across Europe. The ministers reached agreement at emergency talks on the financial crisis in Luxembourg.
The ministers are holding emergency talks on the financial crisis in Luxembourg. The ministers also agreed to support big banks in trouble in order to protect the financial system.
Irish Finance Minister Brian Lenihan said the aim was to restore confidence, to stop savers switching bank accounts. "We have agreed to support systemic financial institutions," deputy German finance minister Joerg Asmussen said.
"Clearly anything we can do to give greater confidence among depositors is very important," said Mr Lenihan.
"We don't want these movements taking place between accounts all the time."
Until the outbreak of the turmoil in the financial sector, most EU governments guaranteed consumer savings of up to 25,000 euros.Until the outbreak of the turmoil in the financial sector, most EU governments guaranteed consumer savings of up to 25,000 euros.
The ministers from the 27 member states hope to bolster money markets after a day of panic saw huge share index losses in Germany, France and the UK. The ministers from the 27 member states hope their measures will bolster money markets after a day of panic saw huge share index losses in Germany, France and the UK.
"We need to find a common solution as one country's solution may be another country's problem," said Swedish Finance Minister Anders Borg.
Guaranteeing savingsGuaranteeing savings
A $700bn US bank bail-out and moves by several EU states to help their banks have not quelled fears.A $700bn US bank bail-out and moves by several EU states to help their banks have not quelled fears.
European and Asian markets were volatile on Tuesday as investors worried global government action may not resolve the crisis.European and Asian markets were volatile on Tuesday as investors worried global government action may not resolve the crisis.
Banking stocks dragged European share markets lower initially, but by early afternoon most indices had reversed earlier falls to edge ahead slightly - the UK's main FTSE 100 index was up 1.2%, while France's Cac 40 was 1.5% higher.Banking stocks dragged European share markets lower initially, but by early afternoon most indices had reversed earlier falls to edge ahead slightly - the UK's main FTSE 100 index was up 1.2%, while France's Cac 40 was 1.5% higher.
Earlier Japan's Nikkei index had plunged more than 5% - shattering the psychological 10,000-point barrier for the first time in nearly five years - before recovering slightly to close down 3%.Earlier Japan's Nikkei index had plunged more than 5% - shattering the psychological 10,000-point barrier for the first time in nearly five years - before recovering slightly to close down 3%.
Australia's financial market suffered before the country's central bank cut its official interest rate by 1%, prompting the country's main share index to close up 1.7%.Australia's financial market suffered before the country's central bank cut its official interest rate by 1%, prompting the country's main share index to close up 1.7%.
Share prices in China, Taiwan and South Korea also saw turbulent trading.Share prices in China, Taiwan and South Korea also saw turbulent trading.
On Wall Street on Monday, the Dow Jones index fell 8% before regaining some of its losses to end down 3.6%.On Wall Street on Monday, the Dow Jones index fell 8% before regaining some of its losses to end down 3.6%.
President George W Bush said it would take some time for the rescue plan to restore confidence to the financial system.President George W Bush said it would take some time for the rescue plan to restore confidence to the financial system.
EU leaders earlier issued a joint statement saying they will take the necessary measures to protect both Europe's banking system and individual depositors.
In Luxembourg, the EU finance ministers aim to frame guidelines for guaranteeing public savings, correspondents say.
'Apocalyptic tone''Apocalyptic tone'
There's a mess in Europe too, because European banks were also seduced over the preceding few years into lending too much too cheaply to consumers and businesses Robert PestonBBC business editor Read Robert's blogInteractive map: How European governments have reactedBloomberg: Bail-out not enoughThere's a mess in Europe too, because European banks were also seduced over the preceding few years into lending too much too cheaply to consumers and businesses Robert PestonBBC business editor Read Robert's blogInteractive map: How European governments have reactedBloomberg: Bail-out not enough
Since late last week, Ireland, Germany, Greece, Austria and Denmark have declared separately that money held by ailing banks will be safe.Since late last week, Ireland, Germany, Greece, Austria and Denmark have declared separately that money held by ailing banks will be safe.
Analysts say the move has angered fellow EU member states who fear it could prompt savers to transfer their money into guaranteed institutions.Analysts say the move has angered fellow EU member states who fear it could prompt savers to transfer their money into guaranteed institutions.
Luxembourg's Prime Minister Jean-Claude Juncker said no major financial institution would be allowed to fail.Luxembourg's Prime Minister Jean-Claude Juncker said no major financial institution would be allowed to fail.
Jean-Claude Trichet, president of the European Central Bank, added: "We will continue to provide monetary markets with all the liquidity they need for as long as it is necessary."Jean-Claude Trichet, president of the European Central Bank, added: "We will continue to provide monetary markets with all the liquidity they need for as long as it is necessary."
But Europe's fragmented response to the crisis so far has done little to reassure investors, correspondents say.But Europe's fragmented response to the crisis so far has done little to reassure investors, correspondents say.
The strains threatening the continent's economies have been felt most acutely in Iceland, where PM Gier Haarde made a national address warning his country it faced national bankruptcy.
The BBC's Ray Furlong in Reykjavik said the tone was, at times, apocalyptic.
In a late-night session, parliament passed emergency legislation to shore up the country's banking system after the national currency, the krona, fell 30% against the euro on Monday.
IMF warningIMF warning
Across Europe, central banks have already offered more than $74bn in short-term loans to banks in an attempt to make cash available.Across Europe, central banks have already offered more than $74bn in short-term loans to banks in an attempt to make cash available.
European turmoil outweighed relief over the US bail-out, analysts said.European turmoil outweighed relief over the US bail-out, analysts said.
But while the idea of a European fund to rescue troubled banks has been floated, it has attracted too little support to go any further, says the BBC's economics correspondent Andrew Walker in Washington.But while the idea of a European fund to rescue troubled banks has been floated, it has attracted too little support to go any further, says the BBC's economics correspondent Andrew Walker in Washington.
He also says the financial crisis will come under the microscope at the International Monetary Fund meetings in Washington in the next week.He also says the financial crisis will come under the microscope at the International Monetary Fund meetings in Washington in the next week.
Its analysts will say the global economy has been sandbagged by high commodity prices, the housing slump and the growing financial crisis.Its analysts will say the global economy has been sandbagged by high commodity prices, the housing slump and the growing financial crisis.
IMF economists have already warned of an increased risk of a severe and protracted economic downturn.IMF economists have already warned of an increased risk of a severe and protracted economic downturn.
On Tuesday a banking reform bill is due to go before the UK parliament while German lawmakers are scheduled to hold an emergency session.On Tuesday a banking reform bill is due to go before the UK parliament while German lawmakers are scheduled to hold an emergency session.
Congress hearings
In the US, both Mr Bush and Ben Bernanke, the chairman of the US Federal Reserve, are scheduled to speak later about the crisis.
Meanwhile, Congress began hearings into the cause of the financial meltdown that triggered the rescue plan.
Richard Fuld, the head of collapsed US investment bank Lehman Brothers, said federal regulators knew his firm had, like others, been caught up in a financial tsunami emanating from the mortgage markets.
The day after Lehman filed for bankruptcy, the government bailed out the insurance giant AIG, saying it was too big to fail. AIG executives are also testifying.
The FBI is looking at Lehman, AIG and US mortgage giants Fannie Mae and Freddie Mac as part of a probe into possible corporate fraud.
Meanwhile US utility companies reported a record rise in the number of customers defaulting on their gas and electricity bills.
The largest increase in power cut-offs were in the states of Michigan (22%) and New York (17%), although rises were also reported in Pennsylvania, Florida and California.