Financial meltdown now reaches German heartland – Europe shivering form American financial winter
Fred Day
Oct. 4, 2008

The winter is yet to come. But the European financial sector is getting chilled with cold financial winds across the Atlantic.

Hypo Real Estate Holding AG, the ailing German property lender, said a 35 billion-euro ($49 billion) government-backed bailout plan collapsed as commercial banks withdrew their support.

German authorities brokered the Sept. 28 bailout to avoid economic damage that would have resulted from the failure of the nation's second-biggest property lender. Hypo Real Estate said in a statement late yesterday that ``alternative measures are being investigated.''''

Hypo Real Estate's financing needs exceeded the bailout plan guarantee, Germany's Die Welt reported yesterday, citing unnamed people in the finance industry. It will need 20 billion euros by the end of next week and 50 billion euros by the end of the year, according to the newspaper. As much as 100 billion euros may be needed to shore up the bank's finances by the end of 2009, Die Welt said. Obermeier declined to comment.

The European Central Bank and the Bundesbank planned to contribute jointly 20 billion euros, and a group of unidentified banks another 15 billion euros. The plan called for Hypo Real Estate to use 42 billion euros in assets, mostly debt owed by government borrowers, as collateral.

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