Germany to inject $95 bn in finance rescue schemeOctober 13th, 2008 - 6:15 pm ICT by IANS
Berlin, Oct 13 (DPA) Germany is to inject 70 billion euros ($95 billion) into the banking system this week as part of a rescue plan for the world economic system, officials said Monday.Up to 400 billion euros more would be offered in government guarantees.
A copy of the draft legislation obtained by DPA indicates Germany will set up a government fund that will inject money into the banks while accepting troubled assets from the banks as security.
Germany’s finance ministry would be authorised to borrow 70 billion euros for the plan, both to cover a liquidity injection for the banks and to take over tainted securities.
The proposed Financial Market Stabilisation Fund will require government credit, increasing Germany’s net public borrowing.
Securities, mainly derivatives, which had been on the banks’ books until, but not after, Monday this week could be taken off the hands of the financial institutions by the fund.
The banks would be required to show they were pursuing “careful” business plans and the government would have power to set caps on their executive pay.
In addition the draft bill authorises the German state to guarantee interbank trading.
The Finance Ministry would also have the power to extend guarantees totalling 400 billion euros up to Dec 31, 2009. Banks would have to pay a fee of 2 percent per annum for such guarantees.
Sources said German Chancellor Angela Merkel and the two leading Social Democrats in her coalition government had agreed on the basics of the plan, with the next move being to discuss it in cabinet.
The details of the plan is expected to be released later Monday.
The two Social Democrats, Finance Minister Peer Steinbrueck and Foreign Minister Frank-Walter Steinmeier, will be key in securing parliamentarians’ support for a rapid passage of the bill.
Together, Merkel’s Christian Democrats and the Social Democrats have an overwhelming majority in the Bundestag lower chamber.
Merkel was expected to address the media at 3 p.m. (1300 GMT) with her remarks to be broadcast live on all-news television.