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Ministers prepare plan to nationalise Northern Rock | Business | The Guardian

The government was last night preparing a contingency plan for a possible new year nationalisation of Northern Rock as it held last-ditch talks with the potential buyers of the stricken bank.

Ministers have reluctantly concluded that temporary state ownership may prove the only way to prevent a final collapse of the Newcastle-based lender.

In a bid to keep the private sector option alive, they agreed last night to give the bid from former Abbey National boss Luqman Arnold equal status to preferred bidder Virgin, amid fears that Richard Branson has been struggling to finalise a deal.

But while the prime minister and the chancellor remain committed to a private-sector solution to the crisis that has contributed to Labour's political problems over the autumn, they believe that a short period of nationalisation may prove the only option. With Northern Rock still losing retail depositors and relying on a line of credit from the Bank of England to keep it operating, ministers accept that the current life-support operation cannot continue indefinitely.

The government believes that the prospects for a quick sale that would safeguard the £25bn of taxpayer support for Northern Rock is being hampered by the turmoil in the world's financial markets, which led to the run on the bank in September.

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Fri Dec 14th, 2007 at 12:24:01 AM EST
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