The announcement came as business leaders and lawmakers met in the capital for feverish talks to keep an embattled real-estate giant afloat.

Hypo Real Estate AG had been planning on a euro35 billion (US$48.42 billion) bailout package financed by the government and private banks, but the deal fell apart on Saturday evening.

Chancellor Angela Merkel vowed that she would not let the failure of any company disrupt Europe's biggest economy.

"We will not allow the distress of one financial institution to distress the entire system," she told reporters while talks between government and business leaders continued in the capital. "For that reason, we are working hard to secure Hypo Real Estate."

Merkel said the plan would ensure that anyone who made reckless market decisions would be made to answer for their actions.

"The federal government will make sure of that," she said. "That is our debt to the taxpayers."

The talks at the Finance Ministry came a day after a euro35 billion (US$48.4 billion) rescue plan for the blue chip company that was approved by the European Union on Thursday unraveled at the seams.

Finance Minister Peer Steinbrueck, who spoke at the press conference with Merkel, said the government was working on an "institute-specific solution" to Hypo's near-bankruptcy.

"We have to start again where, at the end of last week, we thought we had a solution," he said.

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