Germany still exposed to market turmoil: government adviser

Problems in the US subprime mortgage market could hit German exports and economic growth and even claim more victims among German banks, an adviser to the Berlin government told a Swiss newspaper on Sunday.
Beatrice Weder di Mauro, one of the government's panel of economic advisers, was also quoted by NZZ's online version as saying the effect of the financial crisis on the world economy overall could be more serious than previously thought.
The panel will present new German growth forecasts in a couple of months, but Weder di Mauro warned of the risks for Europe's biggest economy due to possible lower exports.
"The momentum in Germany will weaken; we are over the peak of the upturn," NZZ quoted her as saying. Germany, the world's biggest exporter, has been hit harder than some other European countries by the crisis, triggered by banks' exposure to defaults on US subprime home loans made to less creditworthy borrowers.
Some politicians have warned that the effects are far from over, but Finance Minister Peer Steinbrueck said last week Germany would be able to weather the global credit crunch and its economic outlook remained bright.
Weder di Mauro supported the reaction of central banks to provide liquidity at least in the short term and said that in the longer run, monetary decisions would have to depend on how the crisis was affecting the economy and pricing pressure.
She warned of further problems for German banks.
"The fact that further liquidity problems are there indicates that not everything has yet been covered," she said, noting it was no coincidence that German banks were among the first victims of the crisis.
Two banks in Germany have needed bailouts. In July, Steinbrueck helped broker a rescue package for lender IKB, while state bank SachsenLB almost went under due to the subprime crisis and was quickly sold to a rival.
But Germany is not the only European country to have been hit.
Last week, the Bank of England stepped in to help Northern Rock, promising emergency funds after the global credit crunch hit the bank's ability to raise cash in money markets.
Weder di Mauro said she hoped Germany would learn from the crisis and that consolidation in the sector would take place. She also called for better banking regulation. "The position of the Bundesbank (central bank) in regulation must be strengthened," she told the paper.