Regardless of your view on the economy, you have to at least consider the possibility that the financial crisis isn’t over, that we may just be in the eye of the storm. There are all the smaller (but still big) banks failing, as well as the lingering concerns over mortgages, commercial real estate and the national debt.
According to The Telegraph’s Ambrose Evans-Pritchard, the German government is laying the groundwork to head off a second coming of the credit crisis:
“The most difficult phase for financing is going to be in the first and second quarter of 2010,” said Hartmut Schauerte, the economic state secretary.
“We are working as a government to create instruments that can offset a feared credit crunch or any credit squeeze in sectors of the economy,” he said.
Mr Schauerte said firms with weak balance sheets may struggle to roll over loans as they come due in coming months. Negotiations with banks could prove “very difficult”.
State support is likely to be concentrated on boosting the capital base of German firms and providing credit insurance for exporters, perhaps to the tune of €250bn to €300bn (£256bn). “If this service fails, we are going to see dozens of credit collapses,” he said.
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