“We asked him if he wanted to be a zombie but he turned us down”

After years of pressing for tighter financial regulation German politicians got a bad case of schadenfreude and "I told you so" last week as US financial system grappled with the biggest crisis since the Great Depression.

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German Finance Minister Peer Steinbrück was at the forefront, hitting out at the lack of oversight in the United States that he said was in large part to blame for the crisis.

"The long term consequences of the crisis are not yet clear. But one thing seems likely to me: the USA will lose its superpower status in the global financial system. The world financial system is becoming multipolar," Steinbrück said in a speech to parliament.

"Wall Street will never be the same again. A few days ago there were two Mohicans left remaining out of the investment banks. Now they no longer exist," Steinbrück said, referring to the change in status of Goldman Sachs and Morgan Stanley into bank holding companies.

He added that the entire global economy would be changed by the US crisis. "The whole world over we must adjust ourselves to lower rates of growth and - with a time lag - unfavourable developments on labour markets," the centre-left Social Democrat said.

Steinbrück added that what was needed is "stronger international regulation agreed at international level" in order to "re-civilize" financial markets so that such a crisis was never repeated.

Before that it was the turn of Germany's Foreign Minister Frank-Walter Steinmeier, who was recently selected by his Social Democrat party to run for chancellor in September 2009 against the popular conservative incumbent Angela Merkel. We told you so, was Steinmeier's message, made in a visit to the nerve centre of world finance, the New York Stock Exchange.

"I must say that we, and the finance minister (Steinbrück) in particular, were right in the recommendations that we have been making for two years," he told reporters on Wall Street. "First of all, to ensure more transparency on international finance markets and secondly, to demonstrate more sensitivity to risk."

"It is a discussion that we have had for a long time in Europe, that the completely unregulated parts of the international financial market must be more closely monitored and that we must try to reach an agreement on common regulations," he said.

Germany headed the Group of Eight industrialized nations last year and advocated greater transparency in international financial transactions, especially in hedge funds. But it was thwarted by US and British resistance. Merkel, Germany's conservative premier since 2005, was at pains to remind listeners of this.

"I criticise the perception that the financial markets have of themselves," she told the Münchner Merkur newspaper. "Alas, they have opposed for too long the introduction of rules with the backing of the British and American governments," she said. "On top of
national rules, we need more international agreements to stem irresponsible financial speculation."

The comments of course have to be taken in context -- Germany is warming up for elections when Merkel's conservative CDU and Steinmeier and Steinbrück's SPD want to end their fractious current "grand coalition" in place since 2005.

And Germany's banks have also benefited from the huge banking boom in recent years, not least Deutsche Bank, the country's only bank with a meaningful investment banking presence on Wall Street. Germany is also as much part and parcel of the global economy as any other country.

"One should not lose sight of the fact that regulation is not the answer to everything," said Manfred Weber, head of Germany's banking association. "The role of banks in financing growth should not be complicated by new rules and regulations."

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