Germany has agreed to fund a £38.7 billion rescue plan for the country's second largest mortgage lender.

Hypo Real Estate turned to the state after a private rescue package fell apart.

The company's problems have added to the strain on other European financial institutions and come after a number of other emergency deals.

French banking giant BNP Paribas has agreed to buy 75 per cent of Belgian and Luxembourg holdings of the Fortis financial group.

The governments of Belgium and Luxembourg will in return take a minority stake in BNP Paribas. The Dutch arm of Fortis has already been nationalised by the Netherlands government.

© Independent Television News Limited 2009. All rights reserved.