Hypo Real fights for life after rescue collapses

By Jonathan Gould

FRANKFURT (Reuters) - Property lender Hypo Real Estate (HRE) HRXG.DE fought for its life on Saturday after German banks and insurers pulled out of a state-led 35 billion euro (27.3 billion pounds) rescue programme stitched together only days ago.

The news is a fresh blow for the global financial system struggling to master an unprecedented crisis of confidence and poses a political challenge for the Berlin government, which has been fighting efforts to arrange a pan-European bank bailout.

"The 35 billion euro rescue package promised to the Hypo Real Estate Group and extending into 2009 announced last week is currently withdrawn," the Munich-based real estate and public-sector lender said in a brief statement.

"The intended rescue package involved a liquidity line to be provided by a consortium of several financial institutions. The consortium has now declined to provide the line."

HRE said it was investigating alternative measures and that its major shareholders were standing by the bank, but the sudden turn of events added a sense of drama to efforts to restore a sense of order to a badly shaken world of finance.

"We are fighting for the future existence of the company," HRE spokesman Hans Obermeier said.

"We can only assume and hope that all parties participating in these discussions are fully aware of the seriousness of the situation," Obermeier added.

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