Germany takes hot seat as Europe falls into the abyss

Star-crossed bankers: The European Central Bank played a shockingly destructive role Photo: REUTERS

Investors will learn today whether the Paulson bail-out – fattened to $850bn (£480bn) by Congress – can begin to halt the death spiral in the credit system. So far, the response looks terrible.

Germany is now in the hot seat. The collapse of a rescue deal for Hypo Real Estate on Saturday threatens a €400bn (£311bn) bankruptcy that nearly matches the Lehman Brothers debacle for sheer scale.

Chancellor Angela Merkel has been forced to pull her head out of the sand, guaranteeing all German savings, a day after she rebuked Ireland for doing much the same thing. Reality intrudes.

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