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THE ASSOCIATED PRESS

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STOCKHOLM, Sweden - Germany became the newest European country to allay fears about the financial meltdown, guaranteeing private bank accounts as governments scrambled on their own to save failing banks.

Chancellor Angela Merkel said that no citizen should fear for the safety of their investments, speaking to reporters as her government held crisis talks on the collapse of a ballyhooed US$48-billion bailout of Hypo Real Estate AG, the country's second-biggest property lender.

German Finance Ministry spokesman Torsten Albig said the unlimited guarantee covered some $785 billion in savings and chequing accounts as well as time deposits, or CDs.

In Iceland - particularly hard-hit by the credit crunch - government officials and banking chiefs were discussing a possible rescue plan for the country's overstretched commercial banks.

Belgian Prime Minister Yves Leterme said he aims to find a new owner for troubled bank Fortis NV to restore confidence in the company before the opening of markets today.

Leterme told two media outlets that government officials were going over a takeover bid for Fortis' Belgian operations. The bank's Dutch operations were nationalized amid fears they could go insolvent.

British treasury chief Alistair Darling said that he was ready to take "pretty big steps that we wouldn't take in ordinary times" to help the country weather the credit crunch.

In the past year the government has nationalized struggling mortgage lenders Northern Rock and Bradford & Bingley.

"The European banking industry is feeling the wind of default blowing from the other side of the Atlantic," said Axel Pierron, senior vice-president at Celent, a Boston, Massachusetts-based financial research and consulting firm.

The erosion has also injured overall confidence and caused concern among investors, politicians and the European public.

The leaders of Germany, France, Britain and Italy met Saturday to discuss the meltdown that has leapfrogged across the Atlantic from the United States to Europe, but shied away from action on the scale of the massive $700 billion bailout passed by the U.S. Congress on Friday and later signed into law by President George W. Bush.

Looming large was a growing sense that the Federal Reserve and Europe's major central banks - which have been flooding euros and dollars to banks that have grown increasingly unwilling to lend money even to themselves - were ready to institute emergency cuts to their benchmark interest rates this week.

None of the banks, including the European Central Bank and Bank of England, have commented on potential rate hikes or cuts. But analysts believe the Bank of England, which meets this Thursday, will likely lower its rate below five per cent. The ECB left its rate unchanged at 4.25 per cent on Thursday, but opened the door to a rate cut.

Robert Brusca, chief economist at the New York-based Fact and Opinion Economics, said that the ECB does issue such a cut it would a be a sign "that they're really, really scared."