Germany's Social Democrats (SPD) have warned that the banking crisis in the US could have an adverse effect on the German economy, leaving the state with revenue deficits in the billions of euros.
The SPD's budgetary expert Carsten Schneider told the Passauer Neue Presse newspaper on Monday, Sept. 22, that estimates put the loss of revenue for the national budget as a whole at "2 to 3 billion euros" ($2.9 – 4.3 billion). Schneider added that Germany's federal states would also feel the pinch because they would be required to contribute more to boost the national budget and support the federal bank.
Schneider explained that pressure from the US financial crisis had caused damage to the IKB bank, which needed a 1.2 billion euro rescue package from the state development bank KfW to survive, while the KfW itself has seen more than a billion euros leave its coffers in support of the German economy and various banks since the crisis hit.
KfW is currently also suffering due to the mistaken transfer of 300 million euros to New York investment bank Lehman Brothers on the same day that Lehman declared bankruptcy.
Call for more transparency
The Social Democrats also announced on Sunday that they were supporting Chancellor Angela Merkel's reiterated calls for tighter regulation of hedge funds and financial oversight of capital markets.
Steinbrueck and Merkel want more transparency
Merkel rounded on the US and Britain at the weekend, saying that her government tried in vain to win G8 support for increased regulation and transparency of global markets last year and that she felt vindicated in her stance as a financial disaster unfolded on Wall Street in recent days.
Merkel said that when Germany headed the G8 group of industrialized nations last year, it had advocated greater transparency in international financial transactions, especially in hedge funds.
She said a single nation like Germany could do little by itself to fix the international financial system.
"That's why I and Finance Minister (Peer) Steinbrueck insisted back in 2007 during the German presidency of the Group of Eight that we need more rules for greater transparency in international money dealing, with the ratings agencies and with the hedge funds," she said in a newspaper interview with the Muenchner Merkur.
Steinbrueck reiterated the SPD's support for Merkel's stance in a television interview on Sunday night and again called for a worldwide review of financial practices and dialogue on setting up regulatory procedures.