Merkel pledge puts pressure on UK

A pledge by the German chancellor Angela Merkel to guarantee savers' deposits has placed pressure on Gordon Brown to do the same. British officials are furious after Merkel, who joined Brown on Saturday in leading calls on European Union members to resist unilateral action, announced Germany would follow the leads of Greece and Ireland and offer a blanket guarantee on all savings. Since then, Denmark has also followed suit.

Germany has also agreed a €50bn plan to save its second-largest property lender, Hypo Real Estate, after an earlier bail-out package failed to stabilise it.

Brown's "economic war cabinet" will meet for the first time this morning with discussions likely to include the weekend's dramatic events across Europe.

Merkel's government has announced what appears to be a 100 per cent guarantee for all private bank deposits, but the details of the plan are yet to be clarified. Under Germany's current protection scheme, 90 per cent of all bank deposits are already guaranteed but only up to €20,000 per account.

Britain has agreed to raise the current protection limit for savers from £35,000 to £50,0000, but may now need to take more radical steps to avoid a flight of savings. If Germany offers a full guarantee, then the UK and other European goverments would have to produce similar safeguards to avoid a cross-border flight of capital to more secure banks.

Yesterday the Chancellor, who is due to make his first Commons statement on the credit crisis since economic turmoil exploded on the markets, hinted that the Government is considering pumping billions of public funds to take stakes in many, if not all, of Britain's banks.

Alistair Darling said yesterday that the Treasury would do "whatever it takes" to help out banks in the short and medium term.