GERMANY MOVED closer to its first bank nationalisation in more than 75 years after the country’s parliament yesterday approved a bill that paved the way for the government to take control of Hypo Real Estate, the moribund property lender.

A provision in the “Emergency Takeover Law” will allow for expropriation of shareholders as a last resort to stabilise stricken financial institutions. The measure is seen to be clearly aimed at Hypo, which has been propped up by government credit guarantees since September. The expropriation powers granted by the law will expire at the end of June – a provision aimed at reassuring investors that the government does not plan for the widespread and lasting use of the powers. No other banks are thought to be candidates for wholesale nationalisation.

The law also says any institutions to be taken over must be reprivatised after they are considered to have been “sustainably stabilised”.

Axel Weber, president of the Bundesbank, Germany’s central bank, yesterday reiterated the stark warnings of recent days that Hypo could not be allowed to fail. “It would be many times worse than the bankruptcy at Lehman Brothers,” he said.

Munich-based Hypo almost collapsed after it could not obtain refinancing for Depfa, its Dublin subsidiary that relied heavily on short-term borrowing to finance its long-term loans to the public sector. Other banks and the government organised a short-term rescue, later augmented by guarantees from a hastily approved €500 billion bail-out package for all German banks.

The last German bank taken into national ownership was Darmstädter and National Bank in 1931 during the Great Depression.