The Belgian Government rode to the rescue of a stricken bank for the second time in 24 hours last night amid increasingly desperate efforts in Europe to check the spread of financial market chaos.

A day after the partial nationalisation of Fortis, the Dutch-Belgian bank, Brussels announced a similar plan for Dexia, the local government financing specialist that became the latest victim of global turmoil. The move came as panic spread across Europe to Germany and France, prompting President Sarkozy to summon French bankers to an emergency meeting today.

After Dexia’s shares had plunged by 28.35 per cent to close at €7.20, the Belgian authorities issued a statement to say that they would intervene to prop up the ailing institution through a capital increase. Yves Leterme, the Prime Minister, issued no further details of the rescue plan, but sources said that it would involve a €7 billion (£5.6 billion) injection of funds into the bank, which convened an emergency board meeting last night.

Didier Reynders, the Belgian Finance Minister, had earlier promised Dexia, which also has a retail banking unit with more than five million customers, the same guarantee as he had given Fortis, implying another nationalisation.

The French authorities said that they were also prepared to bail out Dexia, which is an important source of finance for French local councils.

In an attempt to calm investors’ fears, Christine Lagarde, the French Finance Minister, said that La Caisse des Dépôts et Consignations, the French state fund that owns 11 per cent of Dexia, was ready to increase its holding.

The intervention by Paris and Brussels came as Fortis shares fell a further 20 per cent to close at €4.15 despite the intervention on Sunday. The governments of Belgium, the Netherlands and Luxembourg injected €11.2 billion into Fortis in a rescue package that leaves them with 49 per cent of the bank’s activities in each of the three countries.

Under the deal, Fortis will sell the €24 billion stake that it acquired in ABN Amro, the Dutch bank, last year, and replace Maurice Lippens as chairman. Filip Dierckx, who became Fortis’s third chief executive this year when he stepped into the post on Friday, acknowledged that the participation with Royal Bank of Scotland and Santander in the takeover of ABN Amro had unsettled his bank. “There was bad timing in the ABN Amro deal,” he said.

Analysts said that Fortis would be lucky to get €8 billion for its ABN Amro stake.

The German Government was also in interventionist mood as it led a consortium of banks to salvage Hypo Real Estate, the commercial property lender, with €35 billion in credit guarantees. The State said that it would guarantee 40 per cent of a first tranche of €14 billion and the totality of a second tranche of €21 billion. The spokesman said that Hypo would be wound up in an orderly way, but he was contradicted by the lender, which said it had no intention of ceasing activity.

As fears mounted across the Continent, Mr Sarkozy called for a European Union response to the turmoil. He said: “There have been multiple contacts between the different European governments. The situation requires rapid reactions. Everybody must show calm and a sense of responsibility. We must not give way in the face of destabilisation. We have to support the banks,” However, regulators in Brussels insisted on a case-by-case approach to the crisis and ruled out an American-style multibillion-euro bailout fund. A spokesman for the European Commission said: “This is neither the time nor the place for a European version of the Paulson package.”

Mr Sarkozy has called in the heads of France’s main banks and insurance companies to discuss the crisis and possible corrective measures.

Heading down

€3.97
Fortis share price at close yesterday, down 23.7%

€7.07
Dexia, down 29.6%

€14.34
ING, down 18.2%

€3.52
Hypo Real Estate, down 74%

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