Germany urges new effort to save Hypo Real

HRE is fighting for its life after German banks and insurers on Saturday pulled out of a state-led 35 billion euro (27.4 billion pound) rescue programme agreed only days earlier.

The banks and insurers were to absorb 8.5 billion euros of the package while the public sector was to shoulder the rest.

"Now is the time for everyone to show responsibility," ministry spokesman Torsten Albig said.

"It's a matter of using all possibilities for a solution," he added. "Everyone has to meet their responsibility, and according to the scale of their responsibility."

HRE said on Saturday it was investigating alternative measures and that its major shareholders were standing by the bank. "We are fighting for the future existence of the company," HRE spokesman Hans Obermeier said.

Albig said experts from the government, the Bundesbank and regulator BaFin were meeting on Sunday to assess the situation and would be consulting with the banks and insurers.

At the appropriate time, Finance Minister Peer Steinbrueck and Chancellor Angela Merkel would decide whether and how to get involved but it was first up to the experts, he said.

Neither HRE nor the banks and insurers involved had informed the government before the collapse of the rescue package, he added. "That is certainly very surprising," he said.

Sources familiar with the plight of HRE told Reuters on Saturday the financial sector had balked at the rescue plan after fresh financing shortfalls had emerged.

They had then insisted that Berlin take on a greater role in saving the bank.

The deal was designed to ensure HRE had enough funding to ensure it could function properly even as the short-term interbank lending market it depends on has practically halted.

Hypo Real Estate was the fifth German bank to be bailed out in the wake of the credit market turmoil stemming from the United States.

(Reporting by Gernot Heller, writing by Iain Rogers, editing by Mark Trevelyan)