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US will Lose Financial Superpower Status - Germany!

Although the present financial turmoil would leave ‘deep marks’ in global markets, the German Finance Minister says this is primarily an ‘American problem’ The United States will lose its superpower status in the world financial system, the world financial system will become more multi-polar.

Berlin
26/09/08


Germany blamed the Unit ed States on Thursday for spawning the global financial crisis with a blind drive for higher profits and said it would now have to accept greater market regulation and a loss of its status as the world’s financial superpower.

In some of the toughest language since the crisis worsened earlier this month, German Finance Minister Peer Steinbrueck told parliament the financial turmoil would leave “deep marks” but was primarily an American problem.

“The world will never be as it was before the crisis,” Steinbrueck, a deputy leader of the centre-left Social Democrats, told the Bundestag lower house.

”The United States will lose its superpower status in the world financial system, the world financial system will become more multi-polar.”

Steinbrueck, whose efforts to secure greater transparency on hedge funds during Germany’s G8 presidency last year collapsed amid objections from Washington and London, attacked what he called an Anglo-Saxon drive for double-digit profits and massive bonuses for bankers and company executives.

“Investment bankers and politicians in New York, Washington and London were not willing to give these up,” he said.

He proposed eight measures to address the crisis, including an international ban on “purely speculative” short-selling and an increase in capital requirements for banks in order to offset credit risks.

The collapse of US investment bank Lehman Brothers and financial woes of other financial institutions like insurer AIG have prompted the US government to propose a $700 billion rescue package for the country’s financial sector.

American problem Steinbrueck welcomed US efforts to stem the crisis but said it was neither necessary nor wise for Germany to replicate the US plan for its own institutions, which are under pressure but do not face the same risks as what had happened to their US counterparts.

The German Bundesbank said earlier this week that the financial market turbulence would hit the earnings of Germany’s big commercial lenders, its publicly-owned Landesbanks and its cooperative banks.

Tighter credit in the wake of the crisis could also constrain household consumption and corporate investment, increasing the likelihood the German economy will fall into recession this year.

“The financial crisis is above all an American problem,” he said.

“The other G7 financial ministers in continental Europe share this opinion.”

But Steinbrueck said German regulator Bafin believed German banks could cope with losses and ensure the safety of private savings, calling the turmoil primarily an American problem.

“This system, which is to a large degree insuffciently regulated, is now collapsing — with far-reaching consequences for the US financial market and considerable contagion effects for the rest of the world,” Steinbrueck added.

He advocated stronger, internationally coordinated regulation, saying the crisis showed that national action was not enough.

“The International Monetary Fund should become the controlling authority for the application of worldwide financial market standards,” he said. —

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