European governments scramble to save banks

Over a weekend of panic, several European governments have moved to shore up their financial systems to prevent a meltdown.

Germany moved to guarantee all deposits to prevent a run on its banks over the weekend, quickly followed by similar action in Denmark and Austria.

Ireland was the first to propose the blanket guarantee, sparking fears that savers would flee UK banks to take advantage of the added security, and Greece followed last week.

The actions put pressure on other EU governments to promise 100 per cent safety for their savers to keep cash from flowing to neighbouring countries who have.

The German government also bolstered its rescue plan for lender Hypo Real Estate by €15 billion on Sunday, while in France BNP Paribas acquired the assets of Fortis to protect the financial giant.

Last week in the UK, the Financial Services Authority (FSA) extended the limit for savings protection to £50,000, while the Bank of England expanded the range of collateral it can accept as security for loans.

Over in the US, the House of Representatives finally approved the economic stabilisation bill on Friday, which is hoped will prevent the economy from collapsing.

Despite the moves to inspire confidence and improve liquidity, stock markets opened lower around the world on Monday.

The FTSE opened lower and has been falling steadily since, declining by five per cent by 09:50 BST.