BERLIN (Reuters) - Germany blamed the United States on Thursday for spawning the global financial crisis with a blind drive for higher profits and said it must now accept more market regulation and a loss of its financial superpower status.
In some of the harshest criticism of the United States since the crisis threw Wall Street banks into financial disarray this month, German Finance Minister Peer Steinbrueck said the turmoil would leave “deep marks” on both sides of the Atlantic, but called it primarily an American problem.
“The world will never be as it was before the crisis,” Steinbrueck told the Bundestag lower house of parliament.
“The United States will lose its superpower status in the world financial system. The world financial system will become more multi-polar,” he said.
Speaking later at a news conference in Berlin, Steinbrueck said he was not predicting an end to the dollar’s role as a leading reserve currency, but rather highlighting the rise of other major financial players besides the United States.
“It does not mean that the dollar will lose its function as a reserve currency, but it will be supplemented by the yen, the euro, which is already the second biggest reserve currency, and also by the yuan,” Steinbrueck said. “Over the next 10 years, we will be dealing with four big, important currencies.”
He said the world would no longer be able to solve financial problems without including countries like China and Russia. Neither China nor Russia are part of the Group of Seven (G7) forum that meets on economic policy, although Russia is a member of the broader G8 grouping that discusses political issues.
Chancellor Angela Merkel’s government, a partnership of her conservatives and Steinbrueck’s Social Democrats (SPD), pushed the G8 to agree measures to boost financial market transparency during Germany’s presidency of the club last year.
But their drive collapsed amid opposition from Washington and London. Merkel’s party and the SPD are keen to claim credit for Germany’s G8 push ahead of a federal election next year.
U.S. ON DEFENSIVE
German criticisms of Washington were echoed by leaders of governments from around the world meeting this week at the United Nations in New York. Many criticized the financial record of President George W. Bush’s administration and warned that U.S. financial mistakes now threatened the global economy.
The crisis has put the Bush White House, which has long advocated a hands-off approach to markets, on the defensive and forced it to rethink its financial policy.
At the same time it has emboldened voices in Europe, Latin America and elsewhere, who are uncomfortable with American-style capitalism and who want tighter regulation of markets.
French President Nicolas Sarkozy, whose country holds the rotating EU presidency, has called for a global summit to overhaul what he has called a “crazy” financial system.
The collapse of U.S. investment bank Lehman Brothers and financial woes at other financial institutions like insurer AIG have prompted the U.S. government to propose a $700 billion rescue package for the country’s financial sector.
The U.S. Congress appears close to approving the rescue, whose fate has kept international markets on tenterhooks.
In the Bundestag, Steinbrueck denounced what he called an Anglo-Saxon drive for double-digit profits and massive bonuses for bankers and company executives.
“Investment bankers and politicians in New York, Washington and London were not willing to give these up,” he said.
He proposed eight steps to prevent a recurrence of the turmoil, including an international ban on speculative short-selling, rules to hold individuals accountable for financial missteps and higher capital requirements for banks.
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