The German government has agreed a 50bn euro rescue package for the country's second largest mortgage lender in the latest twist in the global banking crisis.

The finance ministry confirmed the Bundesbank central bank and market regulators have agreed the deal to save Hypo Real Estate.

"With this mutually agreed solution, the institution will be stabilised and with it, Germany strengthened as a place to conduct finance in difficult times," a spokesman said.

It came as the German government offered a guarantee for all private savings accounts - only days after it criticised Ireland for doing the same thing.

Experts said the U-turn shows the uncertainty and panic in the banking system, and puts pressure on British Prime Minister Gordon Brown to follow suit.

German Chancellor Angela Merkel had warned that if her government failed to salvage the rescue plan, Hypo's collapse would become "a crisis for the entire system".

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