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BERLIN, Oct 13, 2008 (AFP) - A German government financial rescue scheme includes 80 billion euros (108 billion dollars) in fresh capital for banks and 400 billion euros in loan guarantees, a finance ministry statement said.
The measures were discussed and approved by Chancellor Angela Merkel's cabinet and were due to be voted on by MPs with a view to the package becoming law this week.
"Without a functioning financial system the access of individuals and companies to credit is destroyed," the statement said.
The proposals, hammered out in consultation with the German central bank, the financial regulator and representatives from the banks, are aimed at "stabilising the financial market, ensuring the supply of capital to the German economy and providing security for savers and investors," it said.
"Such unusual market conditions call for unusual measures," it said. "It is not just about protecting banks and other financial institutions but also about protecting citizens."
"The government is convinced that dealing with the current dangers takes priority, so that trust in our financial system can be assured," it added.
The government also wants to change certain accounting procedures that have been blamed for exacerbating the financial crisis in time for firms to apply them for their accounts for the third quarter, which ended on September 30.
The entire package will cost taxpayers an immediate 100 billion euros, which is being transferred into a special financial stabilisation fund. This includes the 80 billion euros in fresh capital for the banks and 20 billion euros -- five percent of the loan guarantees -- to cover any losses.
In order to get hold of the capital the banks can offer the government different instruments including preference shares, ordinary shares or hybrid capital.
The government also wants to increase the accountability of managers for company decisions and to improve regulation, it said.
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