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FINANCE

Germany urges US to find solution for Lehman Brothers

German Finance Minister Peer Steinbrück has said he expects a solution for ailing US investment bank Lehman Brothers by Monday, adding that the bank's fight for survival shows how fragile the sector remains more than a year since the financial crisis started.

Germany urges US to find solution for Lehman Brothers
Photo: DPA

Speaking at a two-day meeting of EU finance ministers in Nice, Steinbrück voiced his concern about the struggling bank, which is attempting to form a buyout plan in order to avoid becoming the latest victim of the global credit crisis.

“The news from the United States is bad,” he said with regard to the turmoil stemming from the US subprime mortgage sector.

Speaking specifically about Lehman Brothers, he told reporters. “We expect a solution to be available and announced before the Asian markets open on Monday. Don’t ask me what it will look like, I am not involved (in the negotiations).”

The president of Germany’s central bank, Axel Weber, said that the crisis engulfing Lehman Brothers marked “another round of tension in the markets” after the collapse of Bear Stearns earlier this year.

The travails of big US financial institutions like Lehman Brothers, Freddie Mac and Fannie Mae has focused the minds of Europe’s finance chiefs on whether they are prepared to react in case a major European bank also runs into serious trouble.

Although national governments have their own plans if a local bank hits the rocks, Europe still lacks a prepared response in case of problems at a big pan-European bank.

European financial regulators have failed to keep up with the waves of cross-border consolidation in the banking industry sector in recent years, leaving banks largely supervised along national lines.

That leaves big European banks like Deutsche Bank, Unicredit or BNP Paribas facing a hodge-podge of regulations across Europe, which officials fear could be a burden if ever there were serious trouble.

In Europe, the bailout of institutions as big as Freddie Mac and Fannie Mae would be made all the more difficult because governments would want to limit contributions of taxpayers’ money, especially if the bank were based in another country.

Despite the extreme stress gripping the sector, EU central bankers are mostly confident that European banks can resist.

With Lehman Brothers still in dire straits on Saturday, Germany’s Weber said that at least for German banks “the consequences will be limited” if the US investment bank avoided a catastrophic end.

MONEY

Where in Germany do people have the highest disposable income?

An economic study has shown huge regional differences in income throughout Germany. So which parts of the country have the most to spend each month, and which are feeling the squeeze?

Where in Germany do people have the highest disposable income?

A study by the Economic and Social Sciences Institute (WSI) of the Hans-Böckler foundation reveals stark regional differences in disposable income in Germany. In some cases, households had as much as double the spending money of those in other parts of the country. 

Here’s where people have the most – and least – disposable income each month.

What is disposable income?

The WSI calculated disposable income as the sum of income from wealth and employment, minus social contributions, income taxes, property taxes and other direct benefits or taxes.

What’s left is the income which private households can either spend on consumer goods or save.

The study, which was based on the most recent available national accounts data for 2019, looked at the disposable income of all of the 401 counties, districts and cities across Germany.

Which regions have the highest and lowest disposable incomes?

The study found that the regions with the highest disposable incomes were in the southern states.

Heilbronn in Baden-Württemberg had the highest disposable income of all 401 German counties and independent cities – with an average per capita disposable income of €42,275. The district of Starnberg in Bayern followed in second place with €38,509.

READ ALSO: REVEALED: How much do employees really earn across Germany’s states?

By comparison, per capita incomes in the cities of Gelsenkirchen and Duisburg in North Rhine-Westphalia were less than half as high, at €17,015 and €17,741 respectively. These regions had the lowest disposable income in the country. 

The study also found that, more than thirty years since German reunification, the eastern regions continue to lag behind those in the west in terms of wages.

According to the WSI, the Potsdam-Mittelmark district is the only district in the former east where the disposable per capita income of €24,127 exceeds the national average of €23,706.

Do regional price differences balance things out?

The study also showed that regionally different price levels contribute to a certain levelling out of disposable incomes, as regions with high incomes also tend to have higher rents and other living costs.

“People then have more money in their wallets, but they cannot afford more to the same extent,” WSI scientist Toralf Pusch explained.

READ ALSO: EXPLAINED: When will Germany raise the minimum wage?

Therefore, incomes in the eastern states, adjusted for purchasing power, are generally somewhat higher than the per capita amounts would suggest.

That could explain why, even after price adjustment, the cities of Gelsenkirchen and Duisburg in western Germany continue to be at the very bottom of the list.

Saxon-Anhalt’s Halle an der Saale, on the other hand, which has an average disposable income of only €18,527, benefits from the lower prices in the east.

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