PM to quiz Merkel on cash guarantee

10:13pm Monday 6th October 2008

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Gordon Brown will be speaking to Angela Merkel amid confusion over the extent of the German chancellor's commitments to protect bank deposits.

The Prime Minister is under intense pressure to match Mrs Merkel's actions or face an exodus of cash from British financial institutions.

It had appeared that Germany offered at the weekend to guarantee all private savings accounts, following similar moves by Ireland and Greece.

Britain has only extended protection to £50,000 - up from £35,000 - in UK banks.

The Prime Minister's spokesman said that the Government had been seeking clarification about Germany's position.

But he said: "Our understanding of the situation is that the German government will not be bringing forward legislation for a legally-binding guarantee of bank deposits."

He added that it was "really a matter for the German government to explain their position".

Mr Brown was on Monday morning chairing the first meeting of the new twice-weekly National Economic Council (NEC), set up to manage Britain's response to the financial crisis.

His talks with Mrs Merkel later on Monday follow a string of telephone conversations with foreign counterparts, including French president Nicolas Sarkozy, and the International Monetary Fund over the last 24 hours.

Germany's actions have taken British officials by surprise. Mrs Merkel gave no indication of the moves when she met fellow EU leaders in Paris on Saturday to seek a co-ordinated approach to the turmoil in the banking sector.