LONDON/PARIS, April 23 (Reuters) - Germany is to set up a system of bad banks before the summer recess to hold some 250 billion euros of toxic assets. Finance Minister Peer Steinbruek has assured taxpayers that his solution -- called "eine Bad Bank" (there is no German word for the concept) -- will not weigh on the budget.
He is fooling them, if not himself. If the rescue really were such a free ride for the taxpayer, some savvy commercial investor would have stepped in. Under the proposed scheme, the taxpayer will end up carrying the risk of "Schrottpapiere" (scrap paper).
Like governments everywhere, the Germans are desperate to get their banking systems moving again -- to save the economy by saving the banks, as British minister Baroness Vadera put it.
The snag is simple. Crystallising all the losses in the banking system might lead to widespread nationalisation of banks -- something most governments are keen to avoid.