Europe governments go their own way on crisis

EU finance ministers have an opportunity to discuss the crisis sweeping the Continent as they sit down for two days of talks in Luxembourg.

"This is a very serious situation and one that needs to be addressed ... but it's true that there is not one single magic bullet that will solve this," said EU spokesman Johannes Laitenberger.

The latest attempt at finding a common response came after a weekend commitment by Europe's four leading economic powers--Germany, France, Britain and Italy--fell apart when Merkel announced Sunday that all 568 billion euros ($786 billion) worth of private deposits held in Germany would be guaranteed alongside a new 50 billion euros ($69 billion) bailout package for Hypo Real Estate AG, Germany's second-biggest mortgage lender.

"The EU is liable to be exposed as a fair weather construction, lacking the means of swift response and the hold over its citizens' loyalties to survive really adverse conditions," said Stephen Lewis, an analyst at Monument Securities.

In response to the German move, the Danish Economy Ministry said commercial lenders had agreed to contribute up to 35 billion kroner, or about $6.4 billion (4.6 billion euros), over two years to a fund that will help insure account holders from losses. Austrian officials have indicated that they might join in as well.

That was followed this afternoon by Iceland's guarantee of all deposits after trading was halted in six bank stocks. Icelandic banks' assets dwarf the rest of its economy and its currency has fallen sharply in the past week.

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Associated Press writers Matt Moore in Stockholm, Angela Doland in Paris, Patrick McGroarty in Berlin and Jill Lawless in London contributed to this report.