Europe Doubles Bank Deposit Guarantee

PARIS, Oct. 7 -- European finance ministers on Tuesday more than doubled the guarantee on bank deposits to 50,000 Euros ($68,000) to help restore confidence in the continent's shaken banking system, even as ripples from the ongoing crisis claimed another casualty in Iceland and pummeled banking stocks in London.

Meeting in Luxembourg amid calls for a more coordinated response to the crisis, the ministers failed to come to terms on any broader proposals beyond raising the deposit guarantee from the current 20,000 Euros ($27,000).

The ministers, representing the 15 countries that use the Euro, said in a statement that they would continue monitoring the situation and coordinate their individual responses. The EU nations "all commit to take all necessary measures to enhance the soundness and stability of our banking system and to protect the deposits of individual savers," the statement said, the Associated Press reported from Luxembourg.

The increase in deposit insurance across the Eurozone replaces a patchwork of guarantees that emerged after Ireland acted unilaterally last week, creating a sense of confusion surrounding Europe's country-by-country response to the crisis.

There have been calls for even more significant action on the part of the Eurozone countries, but some nations -- most notably Germany -- have been hesitant to join in a common response.

As the ministers met, the crisis continued to ripple through the financial sector both inside and outside of the Eurozone.

Iceland nationalized Landsbanki, the nation's second largest bank, pegged its plummeting currency to the Euro, and announced it was negotiating with Russia for a loan. Prime Minister Geir Haarde was quoted by the BBC as saying the steps were needed to avoid "national bankruptcy."

In Moscow, officials announced they would make an additional $36 billion available to bolster Russian banks after a previous bailout efforts proved unable to restore confidence in the country's economy.

Media reports in London, meanwhile, indicated that the government was preparing an emergency plan to invest nearly 45 billion pounds ($80 billion) of public funds into several large banks -- news that sent U.K. bank shares tumbling.

The EU action followed one of the worst days ever on world stock markets amid fears that government responses to the global financial crisis, including the U.S. bailout and inconsistent moves by European leaders, would not be sufficient to prevent a worldwide recession.

The day opened with heavy losses in Asia and the Middle East, followed by record losses in Europe and sharp drops in Latin America before the closing bell finally sounded to end another dismal day on Wall Street.

Central banks continued to pump billions of dollars into money markets in hopes of unlocking seized-up credit markets. The Bank of England will inject an additional 40 billion pounds, equivalent to about $70 billion, on Tuesday, according to Alistair Darling, Britain's chancellor of the exchequer, or finance minister.