Dutch pledge 200 billion euros in bank guarantees

The Dutch government has promised up to 200 billion euros in guarantees for inter-bank loans to help temper the credit crisis, prime minister Jan Peter Balkenende announced on Monday.

The guarantee means banks which lend money to other banks are certain to get their funds back if the other institution is unable to repay the loan.

The measure is in line with pan-European rescue plans discussed at a meeting of the 15 heads of state of the eurozone and British prime minister Gordon Brown in Paris this weekend.

The government guarantee is intended to get money flows back into action. "Nearly all banks, however strong their position, are having trouble with liquidity," Balkenende said. The money will be made available within days.

European governments have announced rescue plans totalling over 1,7 trillion euros (2,3 trillion US dollars) to aid troubled banks and insurance companies. This is more than three times as much as the US bailout so far.

The eurozone governments have also promised smaller amounts to buy up shares in banks that fall into trouble. Balkenende said all the European guarantees will be extended under the same conditions to avoid unfair competition.

The Dutch government pledge for 200 billion euros for inter-bank loans comes on top of a 20 billion euro fund it set up last week to support 'healthy' financial institutions in the Netherlands. The Dutch government also spent 16.8 billion euros on nationalising the Dutch operations of troubled financial services group Fortis on October 3.