Germany says meltdown will end US superpower status

Business Materials 25 September 2008 14:12 (UTC +04:00)

The US banking crisis is an "earthquake" that will cost the United States its role as "superpower of the world financial system," German Finance Minister Peer Steinbrueck said Wednesday.

Making a statement on government policy to legislators in Berlin, Steinbrueck said the Group of Seven (G7) finance ministers would meet in Washington next month to discuss how to tighten regulation of capital markets, reported dpa.

"The world will never again be the way it was before the crisis," he said, adding that the write-downs and write-offs of bad credit have so far totalled 550 billion dollars and that no end to the crisis is in sight.

Steinbrueck said the German federal government would continue efforts to trim spending, but would also make some moves to stimulate the economy. He did not give details.

He reiterated Germany's refusal to set up its own bank bail-out scheme, saying the crisis was principally a US problem.

Reiterating Berlin's push for tighter regulation, he accused the United States of blunders.

"The cause of the crisis was the irresponsible exaggeration of the principle of a free, unrestrained market," he told the Bundestag, the lower chamber of Germany's parliament.

Washington has been reluctant to increase minimum equity rules and has too many competing regulators over US investment banks.

"This system, which in many ways is inadequately regulated, is now collapsing," he said, adding that Germany's banking system remained "relatively robust," with German regulators confident they can absorb losses.

"New rules of the road" for the financial markets were needed, he said.

Plans to be debated when the finance ministers of the G7 meet will include tightening cooperation between the International Monetary Fund (IMF) and the Financial Stability Forum (FSF).

The agencies were created by western nations as an "early warning system."