Studio Guest – Thomas Straubhaar, HWWI

MADE IN GERMANY speaks with Thomas Straubhaar of the Hamburg Institute of International Economics about the effects of the financial crisis on the global economy. DW-TV: Mr. Straubhaar, how big is the pain when you look at your investment portfolio? Thomas Straubhaar: The pain is rather big, I think I have lost too much. DW-TV: Everyone has lost, right now. Who are you blaming for the financial crisis? Thomas Straubhaar: I think we should blame many, persons and people and politicians and bankers. Many people have contributed a share to this crisis, starting with all the house owners who thought they could buy houses without having any capital really invested. DW-TV: Let's localize the issue, we're talking about the United States. Thomas Straubhaar: In the United States of course, and also the American government. I think the Bush administration has supported the policy of cheap money just to finance their external policy and finally, of course, the bankers, they have done things they didn't understand. DW-TV: We're going to talk a little bit about that in a second. But we want to talk about what effects this crisis will no doubt have a negative effect on the broader economy. And I guess right now there is no doubt that there will be big-time effects. We've got a chart here we want to show everyone. And you can just look at GDP growth forecasts right now, particularly here in Germany, we're going from 1.8% this year to practically nothing next year. Ok. Zero growth is not a recession. Are we talking about a mega-slowdown or is a recession possible? Thomas Straubhaar: Yes, of course, possible is everything, also next year for the German economy. Basically, it's not a surprise. We have thought before that the German business cycle will slow down. That's regular and normal that after such an increase we had from 2006 to 2008 the economy will slow down. So it's not a real surprise. The financial crisis has probably enforced a little bit, has made it and will make more serious and as long as we have the stable labor market in Germany we should not be in a catastrophic mode. DW-TV: That's actually good news. Let's talk a little bit about the bail out packages we have coming here in Europe and in the United States. Are you glad that the Americans are now following the Europeans in partially nationalizing the big banks in the US? Thomas Straubhaar: I think for just short-term period and short-term policy that's I think the was only way that was open to go. What we should learn after such a crisis we should come back to regular and normal policies now and not doing this crisis management any more to be as a state the owner of a bank I think is the exception and not the rule. DW-TV: But, I mean Mr. Straubhaar, as a European and financial expert don't you want to just look at the White House and Wall Street and say, 'I told you so.'? Thomas Straubhaar: Yes, of course, afterwards we are all more wise and it's easy to give good advice now. What I think is crises they belong to capitalism and we should learn as much as we can out of such a crisis and not to repeat the faults we have done, so that's the economy, how capitalism works in the long run. DW-TV: You know the United States is doing something differently from the Europeans. The United States is forcing these nine big banks in the US to let the government buy in. The Europeans have left that as an option. Which do you prefer? Thomas Straubhaar: I would say to make a private owned bank a state one is the best strategy to follow so you can really also include the shareholders in their responsibility. They will lose everything and I think that is really the right way to handle such a crisis.

DW-World | October 14, 2008

Tags:. .second. .many. .too. .american. .states