Angela Merkel's savings guarantee will be political rather than legal, the BBC reports.
German lawmakers will not impose a 100 percent guarantee on savers' deposits, the BBC reports.
Yesterday, chancellor Angela Merkel appeared to offer new protection, which would mean that all savings accounts would be backed up by government insurance against their provider's collapse. The move, coupled with the bailout of German financial firm Hypo Real Estate, appeared to be an attempt by the government to shore up confidence in the banking sector.
However, sources told the broadcaster's business editor, Robert Peston, that the guarantee is political only - meaning that no new laws will be passed. Frankfurt's Dax - Germany's flagship stock exchange - has also plunged by over five percent today, as investors continue to lose faith in financial firms.
The revelation has a direct impact on savings guarantee policy in the UK. Moves by Ireland, Greece and Sweden to pass laws providing 100 percent protection have upped the pressure on Gordon Brown to provide similar cover - a commitment which could prove extremely costly to the public purse.
However, this pressure might now have lessened, now it is clear that none of the EU's major powers has yet imposed such a legal guarantee. A breaking of ranks on savings protection would have been especially damaging, considering that Germany, France, the UK and Italy all met on Saturday to discuss how best to deal with the financial crisis.
Announcing the guarantee the following day, Mrs Merkel had said: "We tell all savings account holders that your deposits are safe. The federal government assures it."
Writing on his BBC blog, Mr Peston commented: "Whether the German or British governments like it, there does appear to be a clear trend towards almost total protection for European retail depositors."
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