In Berlin, the German government held crisis talks after the collapse of a ballyhooed euro35 billion (US$48.4 billion) bailout of Hypo Real Estate AG, the country’s second biggest property lender.

In Iceland — particularly hard-hit by the credit crunch — government officials and banking chiefs were discussing a possible rescue plan for the country’s overstretched commercial banks.

Belgian Prime Minister Yves Leterme said he aims to find a new owner for troubled bank Fortis NV to restore confidence in the company before the opening of markets on Monday.

Leterme told two media outlets that government officials were going over a takeover bid for Fortis’ Belgian operations. The bank’s Dutch operations were nationalized amid fears they could go insolvent.

British treasury chief Alistair Darling said that he was ready to take “pretty big steps that we wouldn’t take in ordinary times” to help the country in weather the credit crunch.

In the past year the government has acted to nationalize struggling mortgage lenders Northern Rock and Bradford & Bingley.

Darling told the BBC that the government, which has provided billions of pounds (dollars) in support to the banking sector, that it was “important to take generalized action as well as being ready to take particular action if you get a particular problem with an individual bank.”

“The European banking industry is feeling the wind of default blowing from the other side of the Atlantic,” said Axel Pierron, senior vice president at Celent, a Boston, Massachusetts-based financial research and consulting firm.

The erosion has also been seen in overall confidence and concern among investors, politicians and the European public, too.

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