The World From Berlin 'State Intervention Is a Confession of Failure'

Following Sunday's emergency meeting of European leaders in Paris, Germany announced a €500 billion financial sector rescue plan. German commentators are split in their response to the latest move.


Germany's Angela Merkel, France's Nicolas Sarkozy, and the Britain's Gordon Brown met in Paris on Sunday to discuss a coordinated European approach to the financial crisis.
AP

Germany's Angela Merkel, France's Nicolas Sarkozy, and the Britain's Gordon Brown met in Paris on Sunday to discuss a coordinated European approach to the financial crisis.

European leaders met for an emergency summit in Paris on Sunday to discuss a coordinated approach for addressing the financial crisis in the euro zone countries where Europe's common currency is used. At the summit, convened by French President Nicolas Sarkozy, European leaders pledged to broadly pursue a bailout policy based on the direct infusion of capital into ailing banks. In accordance with the principles agreed upon at the emergency summit, German Chancellor Angela Merkel on Monday unveiled plans for a €500 billion ($679 billion) rescue fund to help shore up the German banking system.

Markets rallied on the news, with the German DAX posting strong gains in trading after the market opening and rising by 8.01 percent by afternoon. This is the first time European leaders have come together to articulate a shared strategy for dealing with the crisis.

German commentators have responded to the emergency summit with a mixture of praise and criticism. Some laud European governments for finally coming up with a coordinated response, warning that state intervention may be the only way to stop the crisis, while others argue that though inevitable, the move is tantamount to admitting failure.

The center-left Süddeutsche Zeitung writes:

"The euro zone countries are now trying in a matter of hours to make up for what they have failed to do for years. A common currency without a strong, harmonious political system exposes itself to immense risk. A common currency-area without standarized regulations for the finance industry has the potential to totally lose control during a crisis, as we are now seeing. The seemingly ill-coordinated bailout dance of recent weeks has made it clear that national governments are not strong enough to act on their own. The markets have sensed that European leaders have merely been taking shots in the dark. A precious week went by before the European states discovered the strength of the group and before the United States acknowledged the mistakes in its own bailout plan. ..."

"There will be a price to pay for all these lost years... . The global framework that has reigned since World War II with the Atlantic countries at the forefront has exploded. A new order is needed. Why should the National Bank of China intervene in the crisis when they have less say in the International Monetary Fund than the Benelux countries? And what example can American financial managers claim to set when they ignore even the loosest regulations?"

"The guiding principle of the West has faded and new actors on the global stage are waiting in the wings to take the spotlight. The financial crisis has transformed itself into a world-order crisis, as evidenced by the panicked conference efforts in Washington and Paris."

The business daily Handelsblatt writes:

"The crisis definitely gives us the chance to reconsider our understanding of the state's role in economic questions. The interventions that have just been approved are not, however, a matter of nationalization in the traditional sense. A scenario in which the government becomes country's long-term banker must be avoided at all costs. Instead, helping others to help themselves must be the maxim. The state has offered its helping hand, but no one is forced to take it. If financial firms are able to weather the crisis through the help of private investors, so much the better ..."

"Experience has taught us that in companies influenced by the state, economic reason is often pushed aside because of political considerations. That's why we should be prepared for setbacks. At the same time, the rescue of the international financial system can't be done with the usual means -- and that's why it should not be judged on the kinds of purity laws we have for German beer."

"Still, we must not try to be holier than the Pope. If both Great Britain and the United States pragmatically decide to call upon the state to help with the crisis, then we Germans can be more relaxed about the prospect of state intervention."

The business daily Financial Times Deutschland writes:

"This package, which has the potential to add several hundred billion euros to the burden of Germany's national budget, is to be pushed through parliament with expedited proceedings. Both the measures themselves and the speed with which they are to be adopted indicate that the allegedly stabile German banks are at tremendous risk. Their problems plainly go far beyond a shortage of credit from other banks."

"All in all, the European bailout package yields a sum that surpasses even the current US plan. The finance ministers of the European Union have thus also come to the conclusion that they must approach this problem with guns blazing."

The center-right Frankfurter Allgemeine Zeitung writes:

"The least one can demand is that individual governments retain freedom to maneuver. It's bad enough that German tax payers have to step in on behalf of local bankers. Why should they also be responsible for the chaos wrought by a bunch of Brits and Americans through lax regulations and reckless home-building programs?"

"State intervention is a confession of failure on the part of the financial sector and a severe blow for free enterprise and the social market economy, the best of all ways of life. There seems to be no other alternative for the moment, but in the long run it still holds: The state is not a good businessman. It will need to pull itself back. This is something the chancellor knows. Until then, however, those who need to call upon the state's help should brace themselves for significant oversight from Berlin. The bankers can forget about using taxpayer money to pay their managers fat bonuses."

-- Christopher Glazek, 2:30 p.m. CET

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