Wednesday January 14, 06:04 PM
Germany mulling partial nationalisation of HRE bank: party spokesman
FRANKFURT (AFP) - The German government is considering partially nationalising distressed mortgage lender Hypo Real Estate (Xetra: 802770 - news) (HRE), a spokesman for Chancellor Angela Merkel's CDU party told AFP on Wednesday.
"I can confirm there is some thought in this direction," Otto Berhnardt, CDU (Christian Democratic Union) spokesman for financial affairs, said, adding that a decision could be make quickly.
A total of 50 billion euros (66 billion dollars) in cash and another 30 billion euros in loan guarantees provided to the bank so far appears not to have been enough to get its back on its feet.
On Thursday, Berlin said it would take a stake of 25 percent plus one share in Germany's second biggest bank, Commerzbank (Xetra: 803200 - news) , after pumping in another 10 billion euros.
It was the first time the government had acquired a stake in a private bank since the international financial crisis erupted in mid-2007 and made Berlin the biggest single shareholder in Commerzbank.
HRE, meanwhile, was a front-line casualty when the US market for high-risk, or subprime, mortgages collapsed, putting the global financial system under unprecedented stress.
Berlin has set up a banking sector rescue package that provides up to 80 billion euros in cash injections and 400 billion in loan guarantees to prevent a collapse of the country's financial sector.
In December, HRE said it would slash its workforce by almost half in three years, part of a series of draconian moves to save it from bankruptcy.
HRE and its Irish subsidiary Depfa were caught up in a liquidity crunch that worsened after the US investment bank Lehman Brothers (NYSE: LEH - news) declared bankruptcy in September.
HRE posted a net loss of 3.1 billion euros in the third quarter of 2008 and said that it expects additional losses in its fourth quarter and annual results.
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