February 12, 2015

What German prudence is Jűrgen Stark really talking about?

Sir, though I agree with most that Jűrgen Stark writes in “German prudence is not to blame for the Eurozone’s ills” of February 12, I still need to ask him the following to clarify the concepts.

German bank regulators, following the lead of the Basel Committee, required German banks to hold around 8 percent in equity when lending to German small businesses or entrepreneurs, but allowed banks to hold basically zero equity when lending to Greece. And so, what German prudence is Stark really talking about?

As I see it, it was indeed lousy bank regulations, those to which Germany subscribed, that did the Eurozone in