We won't let banks go bust, pledge Europe ministers

EU finance ministers today pledged to prevent any major European bank from going bust and announced a new minimum savings guarantee that will protect depositors across the Continent.

The twin-track plan was agreed during an emergency meeting of European finance ministers in Luxembourg to reduce the risk of savers switching deposits away from banks thought to be at risk during the global economic turmoil.

The most important change is the promise to support any major bank that comes under threat because of the danger that a collapse would damage the wider financial system - as the failure of the US bank Lehman Brothers has demonstrated.

By contrast, the new savings guarantee of ¤50,000 - equivalent to £38,900 - is likely to have little impact because many countries are already committed to offering even greater protection.

In Britain, for example, the Government is committed to a £50,000 guarantee, while Germany, Austria, Greece, Ireland and Denmark have all pledged to guarantee all savings.

Announcing today's decisions, French finance minister Christine Lagarde said: "We wanted to find a common position to strengthen our co-ordination - we have succeeded. We have reiterated our determination to guarantee the stability and solidity of the banking system."