FRANKFURT (MktNews) - Germany's current economic problems are due in part to poor policy choices by the federal government and the banking sector. Bundesbank President and ECB Governing Council member Ernst Welteke said in an interview.
German companies paid very little corporate tax in the past two years, "an enormous tax relief" at a time when the German government was pursued an expansive fiscal policy, Welteke told the monthly DMEuro magazine. Welteke also linked weak German growth to widespread structural problems, including a host of deficiencies in the education sector, significant rigidity in the labour market and problems related to the health, pension and social security system.
"It is time that these structural problems are taken on. It is up to politicians to do so, but also up to the whole society and its various interest groups to do so," he said. For their part, German banks made poor decisions to "to get themselves into business segments that are not profitable in the long run." For instance, banks waited too long to engage in investment banking and when they finally did they did so "with such dynamic and aggressiveness that (it) resulted in significant cost." The banking sector's significant structural problems result from their failure to undertake necessary consolidation efforts and spending cuts, he charged. //www.marketnews.com