German Chancellor Angela Merkel urged lawmakers to support her government's plan for a financial rescue deal worth 500 billion euros. EU leaders were to discuss their approach to the finance crisis as a summit Wednesday.
Merkel warned the threat to global markets is not over
Merkel warned Wednesday, Oct. 15, that Europe's biggest economy was facing tough times and stepped up calls for new rules to regulate the world's crisis-hit financial system.
"Germany is strong; however, Germany will go through a difficult period," she told parliament, adding that the country should expect slower economic growth but not a sustained downturn.
She also reminded parliamentarians that the threat to financial market stability has not yet passed and stressed the importance of calming the situation by passing her government's package "as soon as possible."
"We're laying down the structures for a market economy with a human face for the 21st century," Merkel said. "We're taking drastic action so that what we're now experiencing will not happen again."
Merkel told parliament that bankers wouldn't be let off the hook for their deeds
Both the Bundestag and the upper house of parliament, the Bundesrat, are set to vote on the 500-billion-euro ($683-billion) bank rescue plan by Friday. Both houses are expected to approve the package, though some leaders in the upper chamber have called for lowering the amount German states pay into the rescue fund.
In her speech, Merkel also reminded the nation's bankers that Berlin expected them to make some sacrifices in return for the financial assistance being offered by the government and would have to accept conditions for taking up state support.
"This is about protection of citizens, not the protection of banking interests," Merkel said. "We're offering something and they have to offer something in return."
Finance Minister Peer Steinbrueck emphasized that, while the bailout was necessary, failing banks would not be saved at taxpayers' expense.
"If there's a fire, it must be put out, even if it was an act of arson," Steinbrueck said.
Council to evaluate financial system
Politicians hope the plan will restore investors' confidence
Merkel announced plans to set up a special expert group to review rules governing the world financial system. She suggested Hans Tietmeyer, the former head of Germany's central bank for the job, he, however, turned the post down. A government spokesperson said a replacement would be named by the end of the week.
While the German leaders were speaking in parliament, European shares snapped two days of big gains to slump by more than 2 percent on renewed recession fears and worries about the impact of a global economic slump on corporate earnings.
On Tuesday, Germany's leading economic research institutes warned that the nation was on the brink of a recession with the think tanks slashing their 2009 economic growth forecasts for the country from 1.4 percent to just 0.2 percent.
At the same time, a key survey showed investor confidence in the country plunging this month as a wave of panic selling engulfed global financial markets.