Wednesday 1 July 2009

UPDATE: German Min:No Credit Squeeze Now, Calls On Bks Duty

UPDATE: German Min:No Credit Squeeze Now, Calls On Bks Duty
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BERLIN -(Dow Jones)- There is currently no credit squeeze in Germany but difficulties might arise in the second half of this year, German Finance Minister Peer Steinbrueck said Wednesday.

Speaking to reporters on the sidelines of a DGB trade union umbrella group conference, Steinbrueck said he sees it as the banks' "duty to ensure that we don't get at all close to a credit squeeze."

He said there is the threat of credit difficulties in the second half of the year and is critical of the trend where banks use additional provided liquidity to expand mainly their trading activities.

Recent data showed that the European Central Bank's huge liquidity injections so far have failed to encourage banks to lend more to households and companies in the euro zone. ECB data suggest that banks have been hoarding much of the liquidity they were given.

Steinbrueck also said governments now must ensure they implement rules that will prevent a repetition of the financial crisis.

He warned against what he called "suspicious" reactions, particularly from the U.K. where the City of London has great political influence.

"They have in mind a restoration, a pure restoration, to restore old conditions as much as possible," he said, sharply criticizing financial market participants in London. "It's noticeable that they are trying to maintain their arbitrage advantages. Wall Street and the City of London won't lose their status suddenly, but their relative position will change."

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-By Andrea Thomas, Dow Jones Newswires; +49-(0)30-2888-4126;

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(END) Dow Jones Newswires

July 01, 2009 08:15 ET (12:15 GMT)

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