German Banks On A Leash

By Author: Luciano Barile
Total Articles: 62
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The German government has chosen the line of prudence in presenting yesterday in Berlin on economic report 2010. This growth, however, there will be even higher than the latest forecast last autumn.
Revised upward by another 0.2% after the recent positive developments, particularly in the export sector, the increase in German gross domestic product (GDP) will arrive this year according to latest government estimates up to 1, 4%, after in 2009 Germany because of the global financial crisis had accused a collapse of 5% of GDP, a fall ever recorded since the end of World War II. Some experts are even more optimistic, and among them also the International Monetary Fund (IMF) who arrives in the German economy expected to grow up to two percent as part of a global growth of 4.3 percent. Optimism aside, the German government is right to be cautious and speak of a 'still-fragile economic recovery "which could prove far more durable. The worst is now behind us, said Economy Minister Brude, but the recovery will be long and difficult.
Companies are at this moment still reducing their capacity and decide to invest with great ...
... caution for fear that the recovery, many drugs from State economic package, will be built on sand. However will the economic upswing will not benefit either of the employees, who must be prepared to lower wage increases or unemployed during the year will rise to an average of 3.7 million units.
Rainer Brude Economy Minister confirmed the willingness of the government to reduce taxation in order to ensure further support for growth and also want to stick to a program of greater budgetary discipline since 2011. Many companies fear that the federal government to intervene more decisively in the various economic and financial processes. Undoubtedly 2010 will be the year of a financial sector reform with a clearer separation of commercial activities of banks from their speculative activities.
After the President of the European Central Bank (ECB), Jean-Claude Trichet, the U.S. government has assured all possible help in the task of curbing all'ingordigia banks, also the president of the Bundesbank, Axel Weber criticized German banks, which still tend to use their profits to pay large bonuses to their managers, instead of handing over strengthening their capital base necessary to keep up with difficulties in case of a new crisis.
The fear of Chancellor Angela Merkel and the entire German government is that the American administration to take its decisions too early to force the banks to focus on what should be their main task, namely the financing of the real economy, without wait for the coordination of different measures at international level. The cases of WestLB in Düsseldorf, the Hypo Real Estate (HRE) in Monaco and Commerzbank showed that the Berlin government is not the same degree of determination which the American president Obama is showing in its aim of forcing the banks to decide if they want to institutions serving businesses of individual citizens and even state or do they want to be investors' risk, as are hedge funds.
From what little has been heard by the German Chancellor about the problem of a tax on financial transactions - considered very important because in addition to hitting the complicated derivatives, which are the basis of the difficulties of the banks, it also affects the trade of shares and bonds - would seem to understand that the German government aims to reform the financial system that forces banks to pay a regular tax on profits in a rescue fund to which recourse in the event of a new financial crisis. The German tendency seems to be to put more emphasis on prevention and less on banks to demand a share in the payment of damages caused.
This should be a problem between shareholders and managers of a bank on which falls the responsibility for the crisis, whose statute of limitations should be appropriately extended, as requested by the German Federal Minister of Justice. Still remains the problem of the size of a bank, that when the size of a JP Morgan or Deutsche Bank can not be left to fail on pain of collapse of the entire financial system. One solution might be the most basic requirement of a capital guarantee, which would could also have the effect of limiting excessive expansion of a bank.
Luciano Barile
Photo: Rainer Bruderle