The World From Berlin 'Germany Will Pay a High Price for US Sins'

German Finance Minister Peer Steinbrück delivered an impassioned speech before parliament Thursday denouncing greed and government failures for the US financial meltdown. But German commentators are asking for reassurance rather than more finger-pointing.


A protester at a rally in front of the New York Stock Exchange opposing the US government's massive bailout plan for financial institutions.
AFP

A protester at a rally in front of the New York Stock Exchange opposing the US government's massive bailout plan for financial institutions.

Politicians in Washington are keeping late hours this week fighting it out over the best way to save the country's ailing financial system. The fate of the Bush administration's proposed $700-billion bailout remains uncertain after talks between Democrats, Republicans and members of the Bush administration imploded Thursday evening, leaving everyone scrambling to reporters to get in the first word in the blame game.

A haggard George W. Bush admitted to reporters that "We're in a serious economic crisis," while Treasury Secretary Henry Paulson -- who once lorded over Wall Street as the mighty master of Goldman Sachs -- got on bended knee to beg House Speaker Nancy Pelosi for her party's support.

As if the situation needed another exclamation point, while the talks were breaking up, federal regulators were seizing the assets of Washington Mutual, America's largest savings and loan as well as the biggest bank failure in US history. The seizure was followed by an emergency sale of bank assets to JPMorgan Chase for $1.9 billion.

On the other side of the world, Germans were reacting to the finger-wagging performance of German Finance Minister Peer Steinbrück before the federal parliament, the Bundestag, on Thursday. "The world will never be the same as it was before the crisis," Steinbrück told German lawmakers. "The US will lose its status as the superpower of the global financial system."

His speech blamed Wall Street's "blind drive for double-digit profits" and insufficient regulation for the crisis. While admitting that it would hurt Germany's economic growth and labor market, he tried to comfort the lawmakers by stressing that the German economy was stable and that "more than anything, the finance market is an American problem."

In Friday's papers, German commentators digest Steinbrück's comments in a number of ways. In general, though, none of them appear ready to gloat -- and none of them are ready to believe that the danger has passed.

The center-right Frankfurter Allegemeine Zeitung writes:

"It's the rhetoric of Sept. 11. … But this crisis actually has much larger dimensions than the attack against the twin towers and collapse seven years ago. Why? Because, this time, the attack on all-American doctrines is not the work of some foreign enemy. It comes from within, from the depths of the system. Largely unobstructed by its own state controls, American capitalism has created its own suicide bomber whose explosives -- derivatives -- have had an even greater effect than the flying bombs of the jihadists. The whole world -- and not just New York -- has a new ground zero now -- Wall Street."

"Germany will also pay a high price for the sins of the US financial system -- higher even than the €320 million that the KfW so prematurely transferred to the bankruptcy administrators of Lehman Brothers. Even if German banks and the German credit system are spared from the chain reaction of a crash, the aftereffects on this side of the Atlantic will be plenty painful: shrinking growth, higher unemployment and less room to maneuver."

The Financial Times Deutschland writes:

"There's no doubt that Steinbrück was right on a lot of points. But the finance minister's droning self-righteousness was completely out of place. And it can't distract us from the fact that he hasn't provided answers on a number of important issues."

"You can start by taking a look at continuing economic developments. Steinbrück is now trying to propagate the theory that the US financial crisis is stabbing Germany's solid economy in the back. But that is nonsense, as can be seen with a cursory glance at the pertinent figures, which show that the economic downturn had already begun much earlier. Steinbrück also gave no hint at how he will handle the foreseeable slump. There wasn't much more than the impassioned warning of hard times ahead."

"Steinbrück's talking big about America's days as the 'superpower of finance' being over sounds just as incredulous for two reasons. On the one hand, that's because they sound a lot like an attempt to redirect the anger of German voters away from the political boards responsible for overseeing (Germany's) state-owned banks and onto the huge crisis in the US. On the other hand, that's because this crisis is far from over. There still might be some bad surprises to come in Europe as well, which can make big mouths suddenly mute."

Right-leaning Die Welt writes:

"Europe has no reason to look on this with schadenfreude. In political terms, there might not be a lot of trans-Atlantic unity at the moment, but -- when it comes to the economy -- the Old World and the New World are Siamese twins. Whoever takes the helm in Washington should have Europe and all its power behind him. Not doing so is just shooting yourself in the foot."

The center-left Süddeutsche Zeitung writes:

"The government in Washington is trying to plaster over this crisis with strong words -- and with strong acts, by bracing itself against the crisis with a $700 billion rescue plan. But even if Congress waves this plan through, it could still go awry. Were that to happen, there might be a chain reaction: Banks could go belly up, one after the other; lending institutions could constrict the amount they grant in loans; the crisis could overwhelm the real economy; and companies could start going into tailspins. And in the end, just as Bush is warning us, millions of jobs could be lost."

"This could happen, but it doesn't have to. If governments, central banks and overseers really take the right steps, and if they can boost the economy and not just rescue the speculators by buying them, it might be possible to get past this crisis. But it will presumably take a long time. However, if politicians and overseers continue to make as many mistakes as they have in the last few years, disaster awaits us."

-- Josh Ward, 1:30 p.m. CET

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