Word: banking
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German Chancellor Angela Merkel and her Finance Minister, Peer Steinbrück, have spent months saying they will never let irresponsible German banks off the hook by taking their toxic assets and putting them into some sort of government-backed bad bank...
...With an election just six months away, Merkel simply doesn't have the political capital with voters enjoyed by the newly elected Obama Administration. She already faces rising criticism and demonstrations against her policies to bail out the banks, such as the government stakes in Commerzbank and struggling mortgage bank Hypo Real Estate. Critics say during years of belt-tightening to cut public debt the government had no money for social programs, but now it is spending billions to bail out irresponsible banks...
...speech to German bankers last week Merkel said her opposition to a bad bank was based on a need for fairness in resolving the crisis...
...many Merkel critics say Germany needs to act now. Merkel's wait-and-see policy just isn't working, they argue. Economists now predict that Germany's export-dependent economy will contract by a record 7% this year. And the latest data from the European Central Bank show that despite the stimulus packages and bailouts across Europe, the region's banks still are not lending money. The volume of lending to the private sector in the eurozone, the 16 countries that use the common European currency, dropped 0.1% in February from the month before and lending to businesses also slipped...
...German banks have an estimated $265 billion to $400 billion in bad debt on their books. Put another way: that's as much as 12% of German GDP. The U.S. bad-bank plans calls for purchasing up to $1 trillion in toxic debt, equivalent to 6.8% of U.S. GDP. German banks have about $550 billion in cash reserves. So, it's not hard to figure out what would happen to the real economy if the banks are left on their own to work through loan failure of this magnitude. "Germany has not succeeded yet in getting control of the financial...