Subprime Fallout in Germany

This is from Der Spiegel. The fallout from the sub-prime debacle is global as banks around the world purchased the securities involved in the belief that they were safe and sound.
As the article mentions, by some estimates German banks stand to lose 111 billion U.S. dollars.


SUBPRIME FALLOUT
German Banks Could Hemorrhage 70 Billion Euros
The fallout in Germany from exposure to America's subprime crisis may turn out to be far bigger than previously feared. One major newspaper is putting estimated losses at a whopping 70 billion euros, while a prominent politician warns that the US recession has already arrived in Germany.


DPA
German Economics Minister Michael Glos is confident that the German economy will weather the global financial crisis with flying colours.
German banking executives fear the current financial crisis (more...) is quickly shaping up to be the worst since 1929. In its Friday edition, mass-circulation daily Bild newspaper cites banking insiders who predict that total losses at German banks from the American subprime mortgage loan crisis could hit the €70-billion ($111 billion) mark.

The paper reports that Germany's banking supervisory authority BaFin has calculated the total volume of high-risk investments made by the country's banks. "Now we have an overview of what's going on," a BaFin spokeswoman told the newspaper. "The figures are reliable." The agency, however, is keeping the data classified.

On Friday, Bavarian governor Günther Beckstein said the state's BayernLB bank would announce losses related to the credit crisis of up to €4 billion -- double the €1.9 billion figure the bank had previously disclosed. The announcement is sure to place additional pressure on government figures in the state who have been accused of trying to play down the magnitude of the bank's red ink flow.

Bild also reports it has obtained information suggesting that state-led bailouts will continue for German banks hit hardest by the subprime crisis. The paper claims that the country's third-largest regional bank, WestLB -- which has been kept alive (more...) with injections from the state of North Rhine-Westphalia -- will soon be requiring an additional €2-billion lifeline. Meanwhile, IKB Deutsche Industriebank AG bank,which has already received a billion-euro bailout (more...), will be draining a further billion euros from the public purse, bringing its total rescue package so far to €8 billion. Globally, the Bank for International Settlements is reporting that banks had already written off losses to the tune of €150 billion by the end of January.

"The American recession will definitely arrive," Michael Fuchs, an economics expert for the conservative Christian Democrats (CDU), told Bild. "It's already virtually here."

Not so fast, argues German Economics Minister Michael Glos, who belongs to the CDU's Bavarian sister party, the Christian Social Union. He feels there's nothing to suggest the recession has already hit: The supply of credit is strong and the government's forecast for GDP growth in 2008, to be announced April 24, remains at 1.7 percent.


.

If the US subprime crisis does indeed deliver the feared slump to Europe, he told the financial daily Handelsblatt, his Economics Ministry was prepared to present plans to mitigate the impact of a recession, including tax relief for mid- to low-income groups. Glos said the state should take advantage of any financial room for maneuver at its disposal in order to lower taxes.

However his calls are driving a wedge between the two partners in Germany's grand coalition government, which is a power-sharing agreement between the Christian Democrats and the center-left Social Democrats (SPD).

German Finance Minister Peer Steinbrück of the SPD promptly rejected any calls for tax cuts. According to Reuters, Finance Ministry spokesman Torsten Albig said: "There will not be any additional tax cuts during this legislative period," which will not end until after national elections in 2009.

Meanwhile, the free-market liberals, the Free Democratic Party, have called on Glos to follow up on his words with action, with the party's deputy chief, Rainer Brüderle, noting that "low taxes make the best economic policy."

nmb/reuters

U.S. jets drop bombs in Basra..

It seems that U.S. Iraq policy has little to do with the situation in Iraq and everything to do with U.S. domestic politics. The last thing the Republicans need is more U.S. casualties. Of course it is also true that the U.S. wants to have Iraqi forces carry out security operations as soon as possible. But since the Iraqis are not up to this on the ground the U.S. (or Brits are called in for air support). To be fair coalition troops also call in air support to avoid casualties. Such a policy particularly in highly populated cities is bound to increase civilian casualties but those casualties are not even counted and will only register with a few activists in the U.S. If the U.S. had suffered casualties equal to the Iraqis the troops would have been long gone.


US jets drop bombs in Basra, British military says; clashes resume elsewhere

The Associated Press
Friday, March 28, 2008
BAGHDAD: U.S. warplanes carried out at least two airstrikes overnight in Basra for the first time since clashes between Shiite militias and Iraqi security forces erupted in the southern oil port this week, a British official said Friday.

Shiite militants also clashed with government forces for a fourth day in Iraq's oil-rich south and sporadic fighting broke out in Baghdad, despite a weekend curfew in the capital.

Prime Minister Nouri al-Maliki has promised "no retreat" in the fight against militias in Basra despite growing anger among followers of radical Shiite cleric Muqtada al-Sadr and his Mahdi Army.

The crackdown has intensified Sadrist anger over recent raids and detentions. They say U.S. and Iraqi forces have taken advantage of their seven-month-old cease-fire to target the movement.

Al-Sadr on Thursday called for a political solution to the burgeoning crisis and an end to the "shedding of Iraqi blood." But the statement, released by a close aide, stopped short of ordering his Mahdi Army militia to halt attacks.

A British military spokesman in Basra said U.S. warplanes carried out at least two airstrikes overnight in Iraq's southern oil port.

Maj. Tom Holloway says jets have been providing air support since clashes between Shiite militias and Iraqi forces erupted in the southern oil port on Monday, but it was the first time bombs have been dropped.

Iraqis have been of control of security since the British withdrew last December but Britain maintain troops there to provide assistance when needed.

In Baghdad, a U.S. helicopter also fired a Hellfire missile during fighting in the Baghdad's militia stronghold of Sadr City early Friday, killing four gunmen, military spokesman Lt. Col. Steve Stover said.

Ground forces called for the airstrike after coming under small-arms fire while clearing a main supply route at 4:10 a.m., he added.

Iraqi police and hospital officials in Sadr City said five civilians were killed and four others wounded in the attack.

The strikes underscore the risks that the U.S. and its allies in Iraq could be drawn into an internal Shiite conflict that has threatened to unravel al-Sadr's cease-fire and spark a new cycle of violence after months of relative calm.

In political developments, the main Shiite bloc in parliament said it would not attend an emergency session called for Friday to find ways to end fighting between government forces and militiamen in southern Iraq.

Deputy parliamentary speaker Khalid al-Attiyah, also a member of the United Iraqi Alliance, said the events in the south are a law and order issue, not legislative.

The bloc has been in contact with its Kurdish allies to boycott Friday's session too, which would prevent a quorum, he said.

It was not immediately clear whether house speaker Mahmoud al-Mashhadani, a Sunni, would still attempt to convene a session.

Amid the crisis, the prime minister has decided to skip this weekend's Arab summit, officials said. Vice President Adel Abdul-Mahdi will attend the meeting in Syria instead, according to Laith Shobar, an adviser to the Shiite vice president.

The campaign to rid Basra, Iraq's second-largest city, 340 miles southeast of Baghdad, of lawless gangs and Shiite militias — some believed tied to nearby Iran — is a major test for the Shiite leader and for the Iraqi military.

The ability of Iraqi leaders and security forces to control situations like this one is key to U.S. hopes of withdrawing its forces from the country.

The prime minister put his credibility on the line by flying down to Basra on Monday and issuing a weekend deadline for the surrender of Mahdi Army militiamen loyal to al-Sadr.

But the Basra offensive has faced fierce resistance and the security operation has triggered a violent response among al-Sadr's followers in Baghdad and cities throughout the Shiite heartland of southern Iraq.

At least 12 militia fighters were killed and seven others wounded in fighting in Mahmoudiya, according to an Iraqi army official.

The local office of radical Shiite cleric Muqtada al-Sadr, meanwhile, claimed 15 Iraqi soldiers had been captured, including two officers, in the city, about 20 miles south of the capital.

Fierce fighting in the Mahdi Army stronghold of Nasiriyah also killed at least four people, including two policemen and two civilians, and wounded 14, an officer said, adding that the clashes had spread to other parts of the city.

Two Iraqi security forces also were killed and three wounded in Kut, police said.

The security officials all spoke on condition of anonymity because they weren't authorized to release the information.

Rockets or mortars also were lobbed at a U.S. facility in the southern city of Hillah, although no casualties were reported, the military said.

Al-Maliki's office also announced Friday that it has given residents in Basra until April 8 to turn over "heavy and medium-size weapons" in return for unspecified monetary compensation.

The deadline is separate from the three-day ultimatum for gunmen to surrender their arms and renounce violence or face harsher measures, which expires later Friday, government adviser Sadiq al-Rikabi said.

The move instead appeared to be aimed at noncombatants who may have weapons like machine-guns and grenade launchers either for smuggling purposes or to sell to militants or criminal gangs.

The government also announced a days-old curfew in Basra would be loosened to allow people to move around in the city from 6 a.m. to 6 p.m. to facilitate shopping and other necessary tasks. It also called on local agencies to use the time to help residents, who have complained of food shortages and other problems amid the chaos.

Despite the order, an Associated Press staffer said he and his family were fired upon by Iraqi security forces when they tried to leave their house.

Sporadic fighting was reported in predominantly Shiite areas in eastern Baghdad despite a curfew banning unauthorized movement in the capital was imposed from 11 p.m. Thursday to 5 a.m. Sunday.

Purported Mahdi Army gunmen abducted three policemen with their weapons and vehicle in one area and clashes erupted between militiamen and U.S.-Iraqi troops in another, according to police.

The U.S. military did not immediately comment on the latest reports but said 26 militants during operations Thursday in mostly Shiite areas in Baghdad.

___

Associated Press writers Ryan Lenz and Saad Abdul-Kadir contributed to this report.