GERMAN BANKING:IRELAND'S BANK guarantee has sparked a bad tempered war of words between Berlin politicians and bankers over whether to introduce a similar scheme in Germany.
Deutsche Bank chief executive Josef Ackermann has warned politicians that now is the time to start talking about a European action plan to guarantee the liquidity of Europe’s financial system – not when a cash-starved bank faces collapse.
“If the United States passes such a package Europe should be prepared to find similar solutions,” said Mr Ackermann, calling for a liquidity rescue plan to be kept in a drawer “just in case”.
Chancellor Angela Merkel dismissed the idea yesterday, warning that her government “cannot and will not sign blank checks for all banks, regardless of whether they behave responsibly or not”.
Mr Ackermann’s remarks prompted accusations of “opportunism” from the Social Democrat (SPD) parliamentary leader Peter Struck. “As long as banks made profits Mr Ackermann cried the loudest for the state not to get involved,” said Mr Struck yesterday.
However, Mr Ackermann received support yesterday from fellow bankers, who said they were confident that government leaders meeting in Paris this weekend would each agree to set aside emergency funds to head off banking crises.
“State guarantees are suitable to restore trust among banks,” said Klaus-Peter Müller, chairman of Commerzbank and president of the German Banking Federation.
“If a majority of governments in the EU give such guarantees it will have to be considered in Germany too.”
He said in the current tense times “mere rumours can move markets”.
Berlin is reluctant to discuss rescue packages because, publicly, it says no German banks are facing liquidity problems. Privately, officials say they do not want to appear eager to help in case banks take them up on their offer.
Michael Fuchs, Christian Democrat (CDU) head of a Bundestag parliamentary committee for smaller businesses, said Ireland’s guarantee distorted the banking market in Europe.
“I hope the European Commission will give some thought to this,” he said. “ Charlie McCreevy has to intervene.”
The differences of opinion over the Irish guarantee extend to German economists.
Dr Thiess Büttner of the Ifo institute in Munich said the German government was right not to agree a state guarantee.“It has already given the signal by its rescue of Hypo Real Estate on Monday that it won’t let banks fail, it won’t let things go that far.”
Meanwhile Prof Gustav Horn of the Institute for Macro-Economy (IMK) in Düsseldorf praised Ireland’s decision, and urged Germany to follow, abandoning its individual bail-out approach.
“The danger of tackling bank crises on a case-by-case basis is that we have no overview of how much it’s going to cost,” said Prof Horn. “In the end this approach doesn’t generate trust in the system, just in a few individual banks.”
He said resistance in Germany to a broader guarantee stems from “wishful thinking that we have a few bank problems and not a systematic problem”.
“Now is not the time for arrogance about the security of German private banks. If one big bank were to go, the others would not be in a position to inject the fresh capital needed.”
Yesterday the first media reports began to circulate about a customer run on German banks.
