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Steinbrück sees financial crisis dragging into 2009

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10:54 CEST+02:00
German Finance Minister Peer Steinbrück believes that repercussions of the global financial crisis from subprime lending will be felt well into next year, according to comments published on Thursday.

The credit market squeeze and volatile market activity that followed the collapse of the US market for high risk, or subprime, mortgages "are going to have repercussions all year and well into 2009," the daily tabloid Bild quoted Steinbrück as saying.

But the Social Democrat added that Germany could nonetheless proceed with a pension increase scheduled for July 1.

"This increase is fair and important, because it tells pensioners that they have not been left by the wayside," Steinbrück said.

Steinbrück has told the European Commission that Berlin expects to turn in a public deficit equivalent to 0.5 percent of gross domestic product this year. In 2007, Germany managed to post a slight surplus of €70 million ($110 million). The Finance Ministry said a return into deficit was the result of reforms to business taxes and unemployment allocations.

The German public account includes the finances of federal, regional and municipal governments along with the national social security system. The federal government's budget remains clearly in the red, and is not expected to be balanced before 2011, according to official forecasts.

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