The crisis caused by German banks' exposure to problems in the US subprime mortgage market will not have a fundamental impact on Europe's biggest economy, German Finance Minister Peer Steinbrueck said on Tuesday.
"There won't be any fundamental slowing of the economy. The basic economic data remain intact," Steinbrueck said at a banking conference in Frankfurt. "We don't have to worry about any impact on the real economy. That's the main message."
Steinbrueck said the world's central banks and other key participants had been acting wisely during the recent financial crisis and knew what was expected of them.
"All are aware of the problems," he said. "The players - including the central banks - are doing the right thing and remain aware of their responsibilities." "The German financial market has enough reserves to ride out the current tensions."
Central banks have pumped liquidity worth billions of euros into the banking system to avert a credit crunch stemming from losses on US subprime mortgage lending. The US Federal Reserve has also cut its discount rate for direct lending to banks.
Due to the turmoil on the markets, analysts expect the European Central Bank (ECB) to hold interest rates at 4 percent this month, after the bank had originally flagged the likelihood of a rate hike.
Fed Chairman Ben Bernanke has said his central bank will take all necessary steps to protect the US economy but would not bail out lenders or investors suffering big losses. Steinbrueck said the crisis had underscored regulators' need for more information about potential risks and called on the International Monetary Fund (IMF) to look more closely at state-owned investment funds.
"State funds, like hedge funds, represent a potential risk for international financial markets," he said. "For this reason the IMF should make a closer examination of potential threats to financial market stability." "We want more transparency on the part of state funds and, as in other countries, government oversight in the event of possible threats to national security interests," he said. Germany has also been urging greater transparency about hedge funds by pressing for a voluntary code of conduct, but the United States and Britain have shown less enthusiasm for this.
Steinbrueck said he believed the recent crisis would make the two countries more receptive to such initiatives. At an earlier speech on Tuesday in Berlin, the finance minister stressed he was not pushing for market regulation.
"What we're talking about is whether we can agree on 'rules of play'," he said, adding these should take the form of voluntary codes of conducts that could lower systemic risks.
Steinbrueck added the recent market turmoil had cast an unflattering light on rating agencies, and highlighted the problems that had arisen with some triple-A rated debt. "Evidently these excellent valuations are worth nothing. It's as if I'd got top marks when leaving school - I was nowhere near this - and no university would take me," he said. He added, however, that he did not know whether there was currently any viable alternative to using the agencies.