European governments were reeling this morning from the shocking news that Germany had orchestrated a $68 billion emergency intervention to save Hypo Real Estate, one of the country's biggest banks, reports the BBC. In the process, German Chancellor Angela Merkel seemingly offered a "blanket guarantee," in the words of the Guardian, on all German personal savings—currently worth some $700 billion. (Has that number got a familiar ring to it?) The move left British treasury officials "furious," coming just hours after Germany had pledged to join a coordinated but imprecisely articulated European response to the fast-developing banking crisis. Merkel's somewhat vague attempt to "reassure German savers all their deposits would be safe," has caused confusion across Europe and "buried any remaining semblance of a unified European response by guaranteeing individuals’ deposits in an effort to avert a crisis of confidence in the nation’s banks," writes the London Times.

Within hours, Denmark had matched Germany's savings pledge, and the U.K. government is under immense pressure to do the same for the simple reason that if Merkel was pledging to protect all savings in German bank accounts, then the move could prompt a flight of capital into these new German safe houses and out of seemingly less secure British and other European banks, unless they could offer the same guarantees. That could amount to a $1.8 trillion pledge in the case of the United Kingdom. Even before Berlin's shenanigans, British chancellor of exchequer Alistair Darling was "considering a dramatic taxpayer-funded recapitalisation of Britain’s banks," writes the Financial Times. Sunday's craziness also included the governments of Belgium and Luxembourg brokering a deal whereby French lender BNP Paribas SA rescues the Belgian and Luxembourg operations of Fortis NV. Meanwhile, Iceland's government was frantically trying to arrange a $13.5 billion capital injection to save all the island's banks. So how are the markets doing this morning after digesting this news? Not surprisingly, Asian exchanges "took a beating," says the WSJ, with the Nikkei down 4.3 percent. The FTSE has seen a similar 4 percent drop this morning.

In the wake of Friday's House bailout vote, the U.S. seems almost tranquil by comparison—aside from the mano a mano tussle for Wachovia between Citigroup and Wells Fargo. Last night, an appeals judge threw out Citigroup's Saturday legal victory, which had temporarily blocked the merger of Wachovia with Wells Fargo, reports CNN Money. Citi earlier had struck a deal with the Federal Deposit Insurance Corporation to snap up Wachovia's banking operations, but Wells Fargo offered to go one step further and also acquire its stricken asset-management or retail-brokerage units for $15.1 billion on stock. The Federal Reserve, alarmed at this "volatile battle" Sunday night was pushing for the two suitors to "divvy up Wachovia's network of 3,346 branches along geographic lines," with Wells Fargo taking over the asset-management and brokerage units, reports the WSJ.

Sticking with legal banking news, the NYT and WSJ both report that Countrywide, the nation’s largest lender and loan servicer (now owned by Bank of America), will settle claims brought by state attorneys over its alleged predatory lending practices. BoA has agreed to provide $8.4 billion in direct mortgage-loan relief for an estimated 400,000 borrowers around the nation who "took out subprime loans with adjustable or fixed interest rates as well as those with option adjustable-rate mortgages." As California Attorney General Jerry Brown put it: “Countrywide’s greed turned the American dream into a nightmare for thousands of Californians who now face foreclosure."

It's heartening to see Detroit is still proving to be a successful test bed for automotive innovation—in the form of fat tax incentives, that is. A week after the Big Three scored a $25 billion loan package to green-ify their factories, European car makers are looking to go one better. Those car makers are seeking 40 billion* euros in aid, the FT reports, to build eco-friendly models and products. "We've seen that the U.S. industry is now getting $25 billion worth of support in terms of financing,'' Fiat's Sergio Marchionne told Bloomberg at the Paris Motor Show. "It would be absolutely necessary that the European Commission do exactly the same thing. It was $25 billion for the U.S., in our case it's 40 billion euros because we have twice the capacity.'' In further defence of the calculation, the European Automobile Manufacturers' Association says it will lose as much as 25 billion euros, or $34 billion, if it is to comply with new carbon-cutting legislation, the International Herald Tribune reports. Japanese automakers are apparently trying more traditional ways to revive business. Toyota has dusted off the zero percent financing gimmick for 11 models to turn around slumping car sales in the U.S., CNN Money reports. The question is: Will anybody qualify?

Toyota is not alone in its aggressive marketing. U.S. retailers, telcos, and even gyms are pulling out all the stops to draw in tight consumers with all sorts of freebies and discounts. Wal-Mart last week even began planning for Christmas, announcing Barbie dolls and Tonka trucks would be discounted to $10. The fear, according to BusinessWeek, is "with the uncertainty around the credit seize-up, consumers may be digging in for a long hibernation." How is the strategy faring? According to the WSJ, the promotions are doing "little to convince cautious shoppers to open their wallets."

Christmas has come a little early for a few industries, evidently. The coal industry incongruously emerges as a big winner in the "clean energy" tax plan approved by Congress last week, the WSJ writes this morning. Coal qualifies for $1.5 billion of the $17 billion in energy breaks. Congress truly was in a giving mood last week. It also included a write-off for NASCAR to build new racetracks and another tax break for the makers of wooden tip arrows in a $107 billion package for businesses, the Washington Post reports.

*Correction: An earlier version of this post had written "40 million euros," instead of 40 billion euros.