Germany goes it alone while Darling lays it on the line

Oct 7 2008 by Bill Gleeson, Liverpool Daily Post

CHANCELLOR Alistair Darling pledged again yesterday to do “whatever is needed” to maintain financial stability, as he dis- closed that depositor protection for savers may rise again from the planned £50,000 limit.

In a statement to MPs returning after the summer recess, Mr Darling insisted: “All practical options must remain open to us.”

Flanked by the Prime Minister, he told a hushed House that the Bank of England would inject a further £40bn into the financial system today to help ease the credit crunch.

And, in an implicit criticism of Germany, which has appeared to act unilaterally to safeguard all private savings accounts, he stressed the need for countries to act together to tackle the crisis.

Mr Darling said the FSA had announced an increase from today to the compensation limit for retail deposits to £50,000, covering 98% of all accounts.

The FSA was consulting on whether to increase the limit further – to “ensure that arrangements here continue to be comparable with international best practice”.

Germany's action on depositor compensation appeared to take the Government by surprise, with the Prime Minister's spokesman saying earlier that ministers had been seeking clarification about Germany's position.

Mr Darling told the Commons: “I’ve always been clear that each country needs to do whatever is needed to deal with its own particularly circumstances.

“However, I also believe that wherever it is possible to do so, countries should work and act together.”

In the last hour all 27 Euro- pean Union member states had reaffirmed the need to take whatever measures were necessary to maintain stability.

“But in the light of what’s happened over the weekend it is especially important that EU member states work far more closely together.

“So, tomorrow I will meet European finance ministers in Luxembourg to further discuss how we bring stability to the system.”

He said the Bank of England will continue to do “whatever it takes” to make cash available for banks to lend.

The Banking Bill will be introduced to Parliament today, giving the Bank of England a statutory role to maintain financial stability.

Mr Darling acknowledged that financial disruption had intensified over recent weeks and spread to all parts of the world.

Shadow chancellor George Osborne reaffirmed the Tories' commitment to work with the Government.