Credit crunch prevention

After the evening summit of government leaders and top-ranking representatives from companies, banks and unions, Finance Minister Wolfgang Schaeuble said Deutsche Bank CEO Josef Ackerman had proposed a plan to create a fund for loans to small and mid-sized companies.

The plan was well-received by the other banks, according to Schaeuble, and echoes an announcement made earlier in the day by the head of Commerzbank. Martin Blessing said Commerzbank, Germany's second largest lender, would increase loans to such companies by 5 billion euros ($7.6 billion).

Economics Minister Rainer Bruederle pointed out that the proposals envisaged the creation of an independent bank fund without the state having to chip in. Before the meeting he had called for the banks to institute measures to increase lending.

Banks to take on more responsibility

It's time for banks to "fulfill their duties" to the wider economy and grant more credit, Bruederle said in an interview with public broadcaster ZDF.

"Taxpayers extended generous aid to help you avoid bankruptcy," he said in reference to the massive bailout package extended to Germany's banking sector a year ago.

If the banks don't show willingness to increase lending, "the state can either increase liquidity once again, or it can resort to regulatory measures," he added, without elaborating on what these might be.

While both Schaeuble and Bruederle said that Germany currently does not have a broad-based credit crunch, they both expressed concern about a shortage of liquidity and the risk the situation may worsen in the coming year.

The Economics Ministry has also announced the creation of a "credit mediator" position, to be filled by Hans-Joachim Metternich, who is currently the head of the public investment bank for the state of Rhineland-Palatinate.

As credit mediator, Metternich will be charged with helping to find loans for the small- and medium-sized businesses that make up the bulk of the German economy. A statement said his job will involve "compiling complaints from companies seeking external funding and finding constructive solutions with credit institutions."

Looming credit crunch?

In her weekly podcast last week, Chancellor Angela Merkel admitted that Germany was in a "critical situation" with regard to a looming credit crunch. "We're going to speak with banking leaders to see what we can do to prevent a credit crunch that could slow the recovery."

Germany's leading industry association, the BDI, prepared a position paper for Merkel ahead of Wednesday's meeting. The BDI said it is primarily up to the country's banks to prevent a credit crunch, adding it would be in the banks' "own best interests to jumpstart lending."

hf/dc/AP/dpa/Reuters
Editor: Neil King