We said last week that this Government needs a clear plan of action, not piecemeal fire-fighting. We argued that it should include a government guarantee of all bank deposits to restore trust. Last night's decision by the German government to take such action places immense pressure on Mr Darling to follow suit. It may also require banks being re-capitalised, if necessary through a government-backed rights issue, to restore confidence.

Given the scale of doubts about the prospects for the solvency of some financial institutions in the context of falling house prices, once one guarantees deposits the logic points heavily towards a much more interventionist stand, with the state deciding which institutions it is prepared to back and which have to be liquidated in an orderly manner.