Meltdown ends US superpower status: Germany
The US banking crisis is an "earthquake" that will cost the US its role as "superpower in the world financial system", German Finance Minister Peer Steinbrueck said.world Updated: Sep 26, 2008 11:30 IST
The US banking crisis is an "earthquake" that will cost the US its role as "superpower in the world financial system", German Finance Minister Peer Steinbrueck said on Thursday.
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.
Later in the day, after meeting French Finance Minister Christine Lagarde in Berlin, Steinbrueck forecast the world system would gravitate around four main currencies: the US dollar, yen, Chinese yuan and euro.
"It will be a multipolar world," he said.
Lagarde called for the European Commission to act fast on the crisis, saying Germany and France had studied what could be done short-term. Their moves to stop short selling of financial stocks were an example.
But Steinbrueck questioned whether a rapid, flexible response at EU level was possible.
"There is a complex thicket of responsibilities," he said.
Earlier in parliament, he said no one could say when the crisis would be over, and quipped, "If someone thinks he sees light at the end of the tunnel, it might just be the headlamp of a train coming at him".
"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 and that no end to the crisis is in sight.
Reiterating Berlin's push for tighter regulation, he accused the US 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".