The German government should not need to bring any national banks under its control in light of the current financial crisis, said Finance Minister Peter Steinbrueck. The minister painted a picture of Germany's banking sector as sound and afloat, but still vulnerable should any further financial turbulence trouble Europe's largest economy. Despite his confidence in Germany's current soundness, the minister said that financial markets the world over, Germany's included, were still operating under a dense cloud of uncertainty and that he could not guarantee against any future nationalization plans for the nation's banks. "So far I don't see the need for state takeovers in Germany. The German banking sector has been hit badly by the financial crisis but less hard" than in other countries, Steinbrueck told the Handelsblatt daily.
The minister painted a picture of Germany's banking sector as sound and afloat, but still vulnerable should any further financial turbulence trouble Europe's largest economy.
Despite his confidence in Germany's current soundness, the minister said that financial markets the world over, Germany's included, were still operating under a dense cloud of uncertainty and that he could not guarantee against any future nationalization plans for the nation's banks.
"So far I don't see the need for state takeovers in Germany. The German banking sector has been hit badly by the financial crisis but less hard" than in other countries, Steinbrueck told the Handelsblatt daily.
(Note that current federal finance minister Steinbrück is a longstanding top 'reformist' in the SPD, who, back when he was Northrhine-Westphalia PM, even co-authored the (in)famous "Koch-Steinbrück paper" with Hessen PM Roland Koch/CDU, which is cited by reformists as the way to go ever since.)
Yesterday, he suggested this eight-point plan, which he will present at the G8 meeting (I condense it):
Temporary full state ownership is only solution How to get out of this bad equilibrium? There is only one way. The governments of the big countries (US, UK, the eurozone, possibly Japan) must take over their banking systems (or at least the significant banks). Governments are the only institutions that can solve the co-ordination failure at the heart of the liquidity crisis. They can do this because once the banks are in the hands of the state, they can be ordered to trust each other and to lend to each other. The faster governments take these steps, the better.
How to get out of this bad equilibrium? There is only one way. The governments of the big countries (US, UK, the eurozone, possibly Japan) must take over their banking systems (or at least the significant banks). Governments are the only institutions that can solve the co-ordination failure at the heart of the liquidity crisis. They can do this because once the banks are in the hands of the state, they can be ordered to trust each other and to lend to each other. The faster governments take these steps, the better.
