What Germany Wants

German experts compiling a brief for the summit in Washington called Friday in Berlin for a rethink of the way banking executives are paid and for a worldwide loan registry.

The report criticizes short-term performance bonuses for financial executives, saying they were a significant cause of the global financial crisis, according to the officials who saw the document.

The group also called for a world registry of big loans, similar to the database of big domestic credits which Germany already has, so that governments can see at a glance how great the credit risks in the nation are.

The European Union's position at the World Finance Summit this weekend in Washington is also the German position. German Chancellor Angela Merkel had a decisive share in the agreement at the EU summit on Nov. 7, 2008.

Ever since, German Deputy Economy Minister Bernd Pfaffenbach has been travelling around the world in the run-up to Washington to sound out possibilities for an agreement among the participants. And also to campaign for what is important from Germany's perspective.

When the state and government heads from economically important countries all over the world meet in Washington on Nov. 15, in the eyes of the German government it all comes down to one thing: "For us it is important that we draw the right conclusions from the current financial crisis," says government spokesperson Ulrich Wilhelm. "And that through a range of agreed upon measures, we ensure that such a financial market crisis does not happen again."

Merkel hopes for fast results

The German government will be hoping for quick results. But as Merkel's spokesman indicated, it's unlikely the summit will produce that. But joint goals have to be defined there and then deliberated intensively afterwards between the participants. The results should then be examined at another summit just weeks away.

According to Wilhelm, the federal government wants to convince the partners to enforce more transparency for financial products and that in addition the incentives in the financial market to seek short-term gain under high risk are removed.

The government also wants to convince the summit's participants that "we also need stronger supervision, for example regarding the question of equity configuration, the regulation of non-banks," explains Wilhelm. "Furthermore, we also need to introduce a monitoring role on an international level."

This will be one of the most controversial points in Washington. The German government wants to delegate this monitoring role to the International Monetary Fund, which is also the European Union's position. Other countries reject this proposal.

The German government's demand to regulate the financial markets more strongly is not just a reaction to the current crisis.

Merkel had already requested a code of conduct for hedge funds at the G8 summit for leading industrial nations in Heiligendamm in the summer of 2007. It failed however due to resistance from the US and the UK. But all the same: Work orders were then assigned to international expert bodies like the financial market stabilization forum. This preliminary work can now help in reaching an effective regulation quickly.