The World From Berlin 'Iceland Should Serve as a Warning'
Germany's financial system is far too solid to suffer the near meltdown facing Reykjavik, but Iceland should nonetheless serve as a warning, German media commentators write.
A man looks out from a doorway of the main branch of Landsbankinn in Reykjavik October 8, 2008. Iceland took over Landsbankinn on Tuesday to help tackle a crisis threatening to overwhelm the island nation.
Business daily Financial Times Deutschland writes:
"The situation in Iceland should serve as a warning and be taken seriously by larger countries, even if that country was in an extreme position to start with. The state allowed the financial sector to become so inflated that its balance sheet total was nine times higher and its net indebtedness twice as high as the country's entire economic output. One can't find a more drastic example of how it's by no means assured that a country can always bail out its banks."
Left-wing Frankfurter Rundschau, commenting on Merkel's reiteration of her commitment to guaranteeing all private bank deposits in a statement to parliament on Tuesday, writes:
"There spoke a chancellor who didn't really want to say anything but who thought she had to make a statement after prolonged hesitation in order to meet the expectations of the public."
"The government won't be able to live up to its core task of creating confidence in this way. No one should blame Merkel and (German Finance Minister Peer) Steinbrück for not being able to present a master plan. But a government can and should satisfy a more mundane need: It must demonstrate decisiveness and credibly show its determination to prevent a crash by all means. With Merkel and Steinbrück, neither the German public nor our partners abroad know what's going to come next."
Center-left Süddeutsche Zeitung writes:
"The 1 trillion guarantee given by Merkel was definitely necessary to stop people from withdrawing their savings on a massive scale. It's working. Many people have confidence in Frau Merkel and in the state, because Germany is one of the world's most creditworthy borrowers. Unlike the governments of many European neighbors, the federal government has high billion euro amounts at its disposal. The capital market would most probably buy the necessary bond issues. Germany doesn't have to worry that it will suffer the same fate as Iceland which is fighting against state bankruptcy."
Business daily Handelsblatt writes:
"The dramatic slide in world markets and the comatose credit markets have ruthlessly exposed the weaknesses of the crisis management so far: There still isn't a convincing strategy in place to get to grips with the crisis. And above all, there's a lack of political leadership. The promise of European finance ministers to rescue all important banks sounds hollow as long as politicians refuse to agree a European solution."
David Crossland, 4.30 p.m. CET