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In unusually stark language, German Finance Minister Peer Steinbrueck told parliament the financial crisis would leave "deep marks" and proposed eight measures to address it, including a ban on speculative short-selling and an increase in bank capital requirements to offset credit risks.
"The world will never be as it was before the crisis," Steinbrueck, a deputy leader of the centre-left Social Democrats, told the Bundestag lower house.
"The United States will lose its superpower status in the world financial system. The world financial system will become more multi-polar," he said.
Steinbrueck lay the blame for the crisis squarely on the United States and what he called an Anglo-Saxon drive for double-digit profits and massive bonuses for bankers and company executives.
"Investment bankers and politicians in New York, Washington and London were not willing to give these up," he said. "Wall Street will never be what it was."
The collapse of US investment bank Lehman Brothers and financial woes of other financial institutions like insurer AIG has prompted the US government to unveil a $700 billion rescue package for the country's financial sector.
Steinbrueck said it was neither necessary nor wise for Germany to replicate the US plan for its own institutions.
The German Bundesbank said earlier this week that the financial market turbulence would hit the earnings of Germany's big commercial lenders, its publicly-owned Landesbanks and its cooperative banks.
Tighter credit in the wake of the crisis could also constrain household consumption and corporate investment, increasing the likelihood the German economy will fall into recession this year.
But Steinbrueck said German regulator Bafin believed German banks could cope with losses and ensure the safety of private savings.
He said the crisis showed the need for a greater state role in setting the rules for markets and called the turmoil primarily an American problem.
"The financial crisis is above all an American problem. The other G7 financial ministers in continental Europe share this opinion," he said.
"This system, which is to a large degree insufficiently regulated, is now collapsing -- with far-reaching consequences for the US financial market and considerable contagion effects for the rest of the world," Steinbrueck added.
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There seems to be cyclical swing between totalitarian economy and Laizes-faire economy. In 1990s totalitarian economies like USSR collapsed like a pack of cards. Now the turn of near collapse of Laizes-faire economy of U.S.A where regulatory system is lose and liberal ending in greedy captains of the economy bringing economy to the brink. So the experiences of the two economic systems of world show that neither is good for the people. The golden mean of watchdog regulation with out adversely affecting entrepreneurial efforts is what is called for. Our economy is criticized for too much regulation. Perhaps it is better to err on the regulation side than on a too liberal side as the experience from the recent events tells us. It is better to hasten slowly while de-regulating the economy than totally liberalise and face disaster as USA is now facing. Indian elephant is better after all.
I dont think this is time to hail the Indian Elephant to earn brownie points. The elephant almost ran out of grass feed in 1990s. This elephant had trampled the ambitions of millions after we became independent. Millions of lost opportunities.Free market economy is definitely better than the totalitarian model of USSR. Free market tends to give free reign to people. And we often forget that greed and lust for power is what drives most humans. So regulation is required to check greed. Regulation CDS market as Fed is proposing now is like paying for funeral after killing someone.This is a US problem for sure, but were the German banks blind when they bought the sub-prime CDS? No one did their homework.If sir you find out a decent working financial model,there is Nobel Prize in economics waiting for you :)