The German government has called an emergency meeting with the central bank and financial regulator to try to save troubled German bank Hypo Real Sarkozy heads to Syria for Mideast peace talks ...
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The bank, Germany's second biggest commercial property lender, is fighting for its survival after a 35bn euro ($48bn; Ј27.2bn) rescue plan collapsed.
Hypo said it would look at alternative measures to fund its business.
The news came after European leaders at a Paris summit stopped short of offering a US-style bank bail-out plan.
The collapse of Hypo Real Estate will put further strain on other financial institutions in other countries, struggling against a crisis of confidence in the global financial system.
German Chancellor Angela Merkel is due to make a statement about the bank later.
'Responsibility'
Hypo Real Estate relies heavily on borrowing from other banks to fund its business and has suffered badly as banks have become increasingly cautious about lending to each other.
Just last week, the firm announced that it had succeeded in securing a credit facility worth 35bn euros stitched together by the government.
Under the deal, the government was going to provide the lion's share of the loan, with a consortium of banks providing 8.5bn euros.
It was designed to make sure that Hypo Real Estate had sufficient short and medium-term funding to make sure it could function while the international money markets remained in a deep freeze.
But Hypo Real Estate said the banks had withdrawn support for the loan, putting the whole rescue package at risk.
Germany's finance ministry said the banks had not informed the government of their plans to ditch their support.
A spokesman called on all parties to prevent the bank from failing.
"Now is the time for everyone to show responsibility," he said.
Some analysts are saying the bank will not last more than a few days without a rescue package, so action must be taken before the markets open on Monday.
Executive 'sanctions'
Correspondents say if Hypo Real Estate does collapse it could plunge already volatile markets even further into debt.
News of the failed plan came after leaders of the major European economies met in the French capital for talks hosted by President Nicolas Sarkozy.
Britain, Germany, Italy and France all agreed to work together to support financial institutions but did not agree to set up a big rescue fund similar to that of the US.
They decided instead to seek a relaxation of the EU rules governing the amount of money individual states can borrow.
The leaders also issued a joint call for a G8 summit "as soon as possible" to review the rules governing financial markets.
Mr Sarkozy announced a series of other measures - including unspecified action against the executives of failed banks.
Speaking after the meeting at a joint news conference, he said the four had agreed that the leaders of a financial institution that had to be rescued should be "sanctioned".
The French president added: "Each government will operate with its own methods and means, but in a co-ordinated manner."
Meanwhile German Chancellor Angela Merkel called on EU countries not to take steps at home that could cause problems for other member states.
The Irish and Greek governments have been criticised within the EU for deciding to act independently by guaranteeing to protect all savings deposited in their banks.
'Trial by fire'
UK Prime Minister Gordon Brown, meanwhile, called on European leaders to send the message that "no sound, solvent bank should be allowed to fail through lack of liquidity".
He also said the meeting had agreed to ask the European Investment Fund to release 15bn euros ($21bn; Ј12bn) in loans to help small businesses operate.
The head of the International Monetary Fund (IMF), Dominique Strauss-Kahn, had earlier urged EU action, saying the financial crisis was presenting Europe with a "trial by fire".
Mr Strauss-Kahn said it had to be "indicated to the markets... that European countries will not react as every man for himself".
He also said he would be scaling back his world economic growth forecasts.
Calls for European action followed the bail-out of both Bradford and Bingley in the UK and Fortis Bank by the governments of Belgium, Luxembourg and the Netherlands.
(BBC)
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