Spain became the latest European country last night to announce a unilateral rescue package, while Iceland received a €4 billion loan from Russia.

Spain declared that it would guarantee all bank accounts to the tune of €100,000 (£78,000), and set up a €30 billion fund to prop up its financial system. It acted after European Union finance ministers meeting in Luxembourg rejected calls for a Europe-wide rescue fund and insisted that measures be taken in cooperation. “If there is anywhere Spaniards know their savings are safe, it’s in Spanish banks,” José Luis RodrÍguez Zapatero, the Prime Minister, said as European governments squabbled over how to protect their citizens from the turmoil.

The Spanish Government fund can be extended to up to €50 billion and will buy assets from banks to ensure they can continue lending. “The Government isn’t going to buy toxic assets, but healthy assets,” Mr Zapatero said. “The fund will buy assets from financial institutions, in a voluntary manner on their part,” he added.

At the meeting in Luxembourg, several EU states had called for a huge increase in protection for individual bank accounts across Europe, but smaller countries said that they could not afford to guarantee the proposed €100,000 for every saver. Sweden led the argument for a guarantee of €50,000, up from the threshold of €20,000 which several countries were abandoning in favour of full protection.

The Irish Republic was the first country last week to propose full protection, but only for accounts held at six Irish banks. A full national guarantee for all deposits at all banks was then offered by Greece, Germany, Denmark and Portugal.

Germany has guaranteed deposit accounts but not put that pledge into law. Angela Merkel, the Chancellor, criticised Ireland for not consulting other EU governments before taking last week’s decision. “The Irish way is not the right way,” Mrs Merkel said last night. “Protecting, without coordination, one’s own banks, without including other international institutions that paid taxes in Ireland for years, and thereby hurting competition, is in my opinion unacceptable.”

Britain announced last week a guarantee of accounts up to £50,000, up from £35,000.

Yesterday the Government of Iceland, which is in the European Economic Area but not in the EU, was forced to take over its second-largest bank, prop up the currency and seek a €4 billion loan from Russia.

Russia’s rescue of Iceland’s central bank is a cheap investment in international goodwill. There could hardly be a bigger contrast between the scale of the two countries: Iceland’s population of 300,000 would fit comfortably into a suburb of St Petersburg.

After the ruinous impact of the Geor-gia war on Russia’s image, the Kremlin needs to be seen asa goodguy.Aleksei Kudrin, Russia’s Deputy Prime Minister, adopted his best accountant’s voice in telling journalists: “Iceland is known as a country with strict budget discipline and has a high credit rating. We positively regard this request.”

With the world’s third-largest foreign currency reserves, Russia can well afford the loan. It will look strange to domestic audiences, however, after a meltdown of Moscow’s stock exchanges to lows not seen since the crash of 1998. But this is also part of the explanation. Humiliated by its pauper status then, Russia sees itself now as a potential powerhouse.

President Medvedev is also arguing this week at a conference in France for the West to take seriously his calls for new forms of international cooperation on security. That now encompass-es financial security, and Mr Medvedev has put down a marker to Europe not to leave Russia out of any new structure for resolving banking crises.

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