The German Economy

Shortly after the German financial rescue plan has been developed, the first problems have been arising. Similarly to the US the plans were to stabilizing German banks and insurers. The problem is that even banks that have been hit are not showing to much interest in those facilities.

I believe this could be because banks that wish to receive support from the “finance stability fund” need to allow for transparency within their strategy, dividend policies as well as employee salaries. Another issue is that large costs can arise from preparing to receive funds from those funds.

Some long term issues can arise from such behaviour as it will decrease the image of those banks. Ratings will decline further and investors may turn to alternative markets with higher security for a while, delaying the stabilizing of the German economy.

Possibly, this may change soon. Regulators have been looking at Great Britain’s model, prescribing banks to increase the minimum capital requirements. If this figure is to be increased to 9% many banks would be forced to get support from the finance stability fund, perceived to be a catastrophic regulatory policy by many banks.