The German government is worried that the current shortage of bank credit plaguing industry will worsen later this year and is considering tackling the problem by forcibly taking stakes in banks, similar to the policy adopted by authorities in the United States and Britain, a German newspaper reported on Monday.The plan envisages the government forcing banks to take state aid and to part-nationalize them in return.
At present small businesses as well as large corporations say they are having problems securing bank loans. The banks have tightened their lending because they have had to make risk provisions to cover remaining toxic assets in their balance sheets, because an increasing number of companies cannot repay their loans in the current economic downturn, and because new international balance sheet rules are forcing banks to put back more equity capital to cover their loans. The government has argued that it's time banks boosted their lending because several of them have taken billions of euros in government aid.
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