The worldwide domino effect

The Dutch, Belgian and Luxembourg governments together injected 11.2 billion (£8.9 billion) into financial services giant Fortis.

The German government said it and a consortium of banks would provide 35 billion of guarantees to enable an "orderly winding-down" of property lending bank Hypo Real Estate.

In Iceland the government stepped in to take a 75% stake in the country's third-largest bank Glitnir in a 600 million deal.

Fortis was bailed out after no buyers emerged for it over the weekend despite talks with Dutch bank ING and France's BNP Paribas. Its shares plunged in frantic trading, falling more than 10%.

The rescue sent shockwaves around the world, with HSBC's China insurance partner Ping An's shares falling 9.1% after it said it may make further provisions for losses from its 4.2% stake in Fortis.

The lifeline was to avert insolvency as part of a wider bailout plan brokered by European Central Bank chief Jean-Claude Trichet.

Belgium's prime minister Yves Leterme said the move was a reassurance for depositors and investors that Fortis would not fail. "We have taken up our responsibility. We did not abandon account holders," he said.

The deal will also force the bank, which has headquarters in Brussels and the Dutch city of Utrecht, to sell its stake in ABN Amro, which it partially took over last year in a consortium led by the Royal Bank of Scotland. Fortis paid 24 billion for its share of ABN.

In all, ABN cost the consortium 70 billion and the deal has already stretched RBS's balance sheet, leading to a £12 billion rights issue this year.

In the bailout, Fortis chairman Maurice Lippens will be forced to resign.

Belgium will invest 4.7 billion and the Netherlands 4 billion in Fortis' banking operations in the two countries, getting a 49% ownership in those national arms of the bank. Luxembourg will invest 2.5 billion for a 49% stake in Luxembourg operations.

Fortis named Filip Dierckx as its third chief executive officer in as many months last week after insolvency fears caused the company's shares to tumble to 5.18, their lowest in more than a decade. The shares have lost more than 75% of their value in the past year.

In Germany the finance ministry denied it planned to nationalise Hypo. It said a consortium of banks would provide a first tranche of guarantees with the government stepping in with a second tranche. A spokesman said the guarantees were vital to prevent damage to the German economy.

Iceland's central bank chairman David Oddsson said that Glitnir, which has operations in the City of London, would have collapsed if the authorities had not intervened. Shares in rival Icelandic banks Kaupthing and Landsbanki fell on the news.

"The precarious global environment means that the weakest links in Europe are now falling," said Mamoun Tazi, analyst at MF Global Securities. "If banks continue not to lend to each other we will see more failures."

Shares in Dexia, the world's biggest lender to local authorities, fell as much as 35% at one point.