(BERLIN) - Germany unveiled a 480-billion-euro rescue package for its banks Monday but Chancellor Angela Merkel warned it would only work if accompanied by tighter regulation in international finance.

"Today's measures are the first element of a new financial market charter ... but it can only be worthy of the name if it is followed by a second element, namely a change in international rules," Merkel said.

"As an international community we must at last draw the correct consequences ... The job of the state in a market economy is to have control. The state is the custodian of order," she said.

The International Monetary Fund must be given more oversight oF financial institutions, rating agencies must improve their game and in future financial instruments must be backed up by sufficient capital, Merkel said.

The rescue package in Europe's biggest economy included 80 billion euros (108 billion dollars) in fresh capital for stricken banks and some 400 billion euros (545 billion dollars) in loan guarantees.

The measures, approved by Merkel's cabinet on Monday and which she expects to become law by the end of the week, were announced at the same time as similar programmes in other countries after European leaders agreed to coordinate efforts at a high-stakes summit in Paris on Sunday.

The guarantees are aimed at getting banks to feel more secure about lending money to each other again after the collapse of Lehman Brothers last month caused lending to all but freeze up.

This in turn risks making banks more reticent about lending cash to consumers and businesses, leading to potentially dire consequences for the so-called real economy.

"Without a functioning financial system the access of individuals and companies to credit is destroyed," the German finance ministry said in a statement.

"I know that today we decided on extensive, far-reaching and in part radical measures," Merkel said. "They have one aim: They should help to bring new trust, trust between banks, trust in the economy, trust in people."

The injections of capital come at a price, however. In return Berlin is entitled to take not only stakes in banks but the government will also demand that managers be made more personally accountable for their actions.

The entire package will cost German taxpayers an immediate 100 billion euros, which is being transferred into a special financial stabilisation fund. This includes the 80 billion euros in fresh capital for the banks and 20 billion euros -- five percent of the loan guarantees -- to cover any defaults.

The government also wants to change certain accounting procedures that have been blamed for exacerbating the financial crisis in time for firms to apply them for their accounts for the third quarter, which ended on September 30.

Last week Berlin put together a 50-billion-euro rescue of Hypo Real Estate, the country's fourth biggest bank, but this took the form of guaranteeing badly needed credit lines and the government said that a rescue package for the entire banking sector was unnecessary.

But a dramatic worsening of interbank lending and the panic-selling on stock markets last week -- Frankfurt's DAX fell by over a fifth -- prompted Finance Minister Peer Steinbrueck to pull out of the drawer what he has called a "Plan B."

The DAX closed 11.4 percent higher on Monday.

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