Gordon Brown is under intense pressure to guarantee all savings in British bank accounts after Germany and Denmark became the latest European countries to make the move.

Treasury officials were scrambling to discover the extent of the response by the German leader, Chancellor Angela Merkel, to the deepening financial crisis, which immediately sparked speculation that other European nations would be forced to follow suit. Late last night, the Danish government guaranteed all bank deposits as part of a deal to set up a 35bn Danish kroner (£3.6bn) liquidation fund.

Until now, the Chancellor of the Exchequer, Alistair Darling, has only gone as far as raising the guaranteed deposits from £35,000 to £50,000. Britain's banks hold about £2 trillion (or £2,000bn) in private and corporate deposits – close to double the UK's annual GDP. Personal deposits account for £900bn.

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The Prime Minister will chair the first meeting today of the Government's economic war cabinet. It will have to find a response to Germany's decision, which follows moves by Ireland and Greece to ward off the financial crisis by offering savers unlimited protection. The UK Government is likely to have been angered by these unilateral actions but will probably follow suit to prevent the large-scale flow of capital out of the country.

Ms Merkel, however, had previously said that she was opposed to moves by other countries to do exactly what she condoned yesterday.

Over the weekend, Peter Mandelson, the former EU trade commissioner who is now the Business Secretary, said unilateral moves by individual countries to guarantee bank deposits could "spark a new wave of economic nationalism". He added: "People have to realise that selective or national approaches could lead markets to look to parts of the financial system in a distorted way."

Ms Merkel's surprise announcement was made hours before the German government and banks agreed a €50bn salvage plan for Germany's Hypo Real Estate Bank, the country's second-biggest commercial property mortgage bank. Talks over a €35bn rescue plan collapsed earlier in the day, before an extra €15bn was found.

"We will not allow the problems of one financial institution to affect the entire system," said Ms Merkel. "We are saying to all savings account holders that your deposits are safe. The government guarantees this."

Nick Clegg, the Liberal Democrat leader, called for a pan-European system of deposit guarantees. "Germany is Europe's economic superpower," he said. "Ireland's action last week to guarantee all deposits made a common European approach to deposit guarantees necessary. Germany's decision today makes it completely unavoidable."

The German decision comes just days after the Irish government issued its own blanket guarantee for commercial and private bank deposits. This sparked international protests as funds began to pour into Irish banks and prompted the Treasury to raise the guarantee on British deposits from £35,000 to £50,000.

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Ed Mayo, the chief executive of the Government's new consumer watchdog, Consumer Focus, said Britain should follow Ireland's example and underwrite all individual holdings with its national banks. "The best way to build consumer confidence is by giving absolute rights," he said.

Mr Darling signalled yesterday he was ready to pump billions of pounds of taxpayers' money into Britain's banks as he pledged to take "pretty big steps that we wouldn't take in ordinary times" as it emerged that contingencies being considered by Treasury officials include buying stakes in a host of banks. The Chancellor said the Treasury was ready to offer further help to individual banks in difficulty. Ms Merkel's decision will dominate the first meeting of the Government's National Economic Council today.

A Treasury source said the Government's £50,000 guarantee for savers remained unchanged. He said officials were clarifying the extent of the German guarantee before deciding on Britain's response. The German announcement was not mentioned during talks in Paris between leaders of the four biggest European economies, when Britain, Germany, Italy and France agreed to co-operate to support financial institutions.

Tomorrow, the Government will publish its Banking Bill, designed to streamline emergency legislation passed to allow the nationalisation of Northern Rock.

Brown's National Economic Council

Gordon Brown: Prime Minister and council chairman

Alistair Darling: Chancellor of the Exchequer and deputy chairman

David Miliband: Foreign Secretary

Peter Mandelson: Business Secretary

John Denham: Innovations, Universities and Skills Secretary

Ed Balls: Children's Secretary

Ed Miliband: Energy and Climate Change Secretary

Hilary Benn: Environment, Food and Rural Affairs Secretary

James Purnell: Work and Pensions Secretary

Hazel Blears: Communities Secretary

Jim Murphy: Scottish Secretary

Paul Murphy: Welsh Secretary

Shaun Woodward: Northern Ireland Secretary

Yvette Cooper: Chief Secretary to the Treasury

Margaret Beckett: Housing minister

Lord Drayson: Science minister

Paul Myners: minister for the City

Baroness Vadera: minister for Economic Competitiveness and Small Business

Stephen Carter: minister for Communications, Technology and Broadcasting

The council will meet in the Cobra meeting room in the basement of the Cabinet Office. The windowless briefing room has been established for meetings that tackle national crises.