Germany passes law to allow nationalisation of banks

Germany has approved a new law allowing it to nationalise its banks, paving the way for a possible state seizure of struggling lender Hypo Real Estate.

The cabinet abandoned a post-war pledge to respect private property in the interests of the nation’s financial stability, officials said.

It is the latest Western government, following Iceland, Ireland and the UK, forced to concede that seizing or part-nationalising banks may be the only way to prevent the collapse of entire financial systems.

But German politicians have fiercely debated whether seizure of private assets should be permitted, since the practice of “Enteignung” is associated with the Nazi expropriation of Jewish property

Related articles in German:
Merkel macht Weg für HRE-Enteignung frei (Financial Times Deutschland):
Zum ersten Mal in der Geschichte der Bundesrepublik kann eine Bank verstaatlicht und ihre Eigentümer enteignet werden können.

Enteignungsgesetz treibt Wirtschaft auf die Palme (WELT ONLINE)
Warum die HRE nicht pleitegehen darf (RP ONLINE)
“Absolute Ausnahme” – Enteignung der HRE (n-tv)
Hypo Real Estate: Großes Entsetzen über Merkels Enteignungspläne (FOCUS Online)

Hypo Real Estate has already been given €102bn (£90bn) in state backing since September, but analysts have questioned whether this is enough for a bank crippled by exposure to the property market.

US private equity house JC Flowers holds a 25pc stake in the bank, but this stake would pass to the German government in the event of a nationalisation. It has been suggested that the German government may create a bad bank of loans owned by Hypo Real Estate and a second troubled lender Commerzbank.

However, Commerzbank said last night that it would fight any pressure from the government to form such an institution, which could contain hundreds of billions of euros in assets.

“I can only give a clear rejection to cooperation with Hypo Real Estate,” Mr Strutz said. “We think that every financial house must find its own solution.”

By Rowena Mason
Last Updated: 6:18PM GMT 18 Feb 2009

Source: The Telegraph

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