Jan. 9--Germany is to part-nationalise Commerzbank in a bid to shore up its shaken banking system.

Berlin's Financial Markets Stabilisation Fund will inject £9bn in return for a 25pc stake in the struggling lender, which has a major City of London presence.

The move came as the Organisation for Economic Co- operation and Development lashed out at the bank bailouts in Europe and the US warning they may not work.

The Paris-based organisation said the bank recapitalisation model championed by Gordon Brown last year could fail to restore the banks to health.

Commerzbank is currently in the process of buying Dresdner Bank from insurer Allianz, in Germany's largest- ever bank merger. As part of the rescue deal, Allianz will boost Dresdner's capital by £1.3bn by taking over some of the bank's risky assets.

The move is evidence of the rapid deterioration of the financial sector across Europe.

But the OECD said in a report that the scramble to inject new capital into banks was misconceived.

It said governments should first guarantee deposits to stop bank runs, and then cleanse banks of bad loans. Only after that should they move on to recapitalise the banks.

The OECD said skipping the second step "is a potential risk for the recent decisions of the UK, EU and US."

The critique will be a blow to Brown, who has held forth his emergency recapitalisation in October as a model for the rest of the world.

Commerzbank is particularly exposed to the woes of the financial system because of its large investment banking operations.

In a statement, Commerzbank said: "Against the background of the intensified financial crisis, the new bank will thus be enabled to meet the substantially higher capital-requirements for banks." The firm is expected to dismiss at least 1,000 City of London workers as part of its merger with Dresdner.

One analyst said: "The problems in Germany haven't been as big as they have been in some UK and Irish banks.

"But German banking has always been barely profitable, so some of them including Commerzbank, have chased investment banking, which is a sector in trouble."

The new capital is partly thought to be necessary because of strict accounting rules being applied to the merger between Commerzbank and Dresdner.

But it also reflects the dramatic deterioration of Germany's economy, which tumbled into recession last year.

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