No Nationalization Plans
October 9, 2008
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.
"But this might change as uncertainties about future developments are currently much too high," he said as quoted by the paper.
The German government, together with banks and insurance companies, agreed late Sunday, Sept. 5 on a 50-billion-euro ($68 billion) deal to bail out the country's stricken commercial property lender, Hypo Real Estate.
Steinbrueck said the German economy had been hit harder than previously expected, an impact which will leave its mark on the nation's growth rate, slated to hover at between zero and 0.5 percent next year, down from the current forecast of 1.2 percent for 2009.
European slow down
Germany's growth predicament parallels that of the eurozone, which the European Central Bank (ECB) has said it would also seek to rework.
"Our forecast of 1.2 percent growth in 2009 will be revised down," ECB board member Lorenzo Bini Smaghi told the Italian financial daily Il Sole 24 Ore without citing the new figure.
The central bank had already down-scaled its previous eurozone growth forecast of 1.5 percent last month.
"The second quarter (2008) was negative, and the third may be as well. There's a risk of more or less zero growth for several quarters," Bini Smaghi said.
"It will depend a lot on the positive impact that will come from lowering interest rates, from a more competitive euro and especially from a sharp drop in prices of raw materials."
Wednesday saw a coordinated effort by central banks around the world to cut interest rates as a joint response to the global financial crisis.
The ECB dropped its interest rate to 3.75 percent.
The decision was taken in coordination with central banks in Britain, Canada, Sweden, Switzerland and the United States, the ECB said in a statement.
Deposit protection slammed
But Czech Prime Minister Mirek Topolanek, who is scheduled to be the next European Union president, has condemned the EU's steps to fight the global financial crisis as too interventionist.
Topolanek specifically slammed several EU members for providing unlimited bank deposit protection, calling it "a shameless step" that boosts liquidity in those countries at the expense of others.
"All these measures are absolutely artificial. They contradict the EU's substance," news agency CTK quoted him as saying late Wednesday during a visit to Turkey.
"And I have to say it is a huge disappointment. What happened in recent days has damaged confidence in the EU more than anything else."