German Finance Minister Peer Steinbrueck has warned banking managers over their reluctance to lend. In Sunday's edition of the tabloid Bild he says he was doubtful that a bill passed on Friday in Berlin to allow German banks to park their toxic assets in a so-called bad bank structure will be enough to get the banks back into the business of providing credit.

Instead, he's threatening banks with unnamed sanctions should a credit crunch be the result of their too conservative lending policies. His warning is that the government and the central bank will have to take steps to force the bankers' hand. These as yet unspecified actions, Steinbrueck warns, would include measures never before used against financial institutions in Germany.

Late last year, banks all over the world demanded billions in financial aid from their governments. Otherwise, they said, they would be forced into bankruptcy with unforeseeable consequences for the world economy.

Governments from Washington, to London, to Tokyo to Berlin complied, despite the enormously high political risk involved. There was political consensus that the banks were simply too big to be allowed to fail.

Despite state aid, banks are reluctant to lend

Today, German banks are doing far better, but stand accused of still being reluctant to lend to businesses and companies which increasingly feel the pinch of the global recession.

For months, small and medium sized companies in Germany have been finding it more and more difficult - if not impossible - to keep credit lines with their banks open.

"At the moment there is no credit crunch," said Martin Wansleben, managing director of the German Chamber of Industry and Commerce.

"But more and more companies are having difficulty getting needed loans. It's more complicated. It's more expensive. And many are simply being rejected outright."

But, could the German government actually force banks to lend money? Finance Minister Peer Steinbrueck refused to fuel speculation on that. However, other politicians are less subtle in their warnings to the banks.

Condemnation from across party lines

"We helped the banks with massive funding and political support," Saarland State Premier Peter Mueller said on Saturday.

"Now, it's up to the banks to provide that help to companies."

The banks are accused of taking the government's money but using it only to improve their own financial situation, not the country's economy.

"We must now ensure that Banks are obliged to offer credit on a more liberal basis," urged Fritz Kuhn, parliamentary leader of the Greens.

Politicians of all parties are united in their determination to force German banks to make credit available over fears of unemployment rising even further due to a lack of credit for businesses.

German President Horst Koehler - himself a former head of the World Bank - added his voice to the critics in a television interview.

"I appeal to the banks to do more to ensure that the economy can grow," he said.

Koehler's criticism of the banks was the most pointed of all. He accused them of first causing the worldwide economic crisis and now hesitating to help find a solution for it.

rd/AFP/dpa
Editor: Carl Holm