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US loan crisis could hurt growth, warns German minister

The US home loan crisis could damage German growth by pushing up the euro and crimping exports from the biggest eurozone economy, German Economy Minister Michael Glos warned in an interview yesterday.

"No one knows what the effects of the American financial crisis on Germany will be in the end," Glos told the mass circulation newspaper Bild.

"The dollar's weak level against the euro and high oil price could slow our growth, which has been strong until now," he said.

"If the dollar continues to fall, it will hamper our export perspectives," he said.

Germany's economy relies to a large extent on exports, while consumption represents a much smaller pillar of growth compared with countries like the US.

It was not the first time that Glos voiced concern over the banking system crisis that followed the collapse of the US market for high-risk home loans, known also as the subprime market.

On Friday, he had warned that "complacency was not an option" given the shock that the US crisis dealt to international financial markets.

The government has forecast that the German economy would expand by 2.3 percent this year, while analysts at Commerzbank estimate it could reach 2.5 percent before falling back to 1.8 percent next year.

In the UK, Northern Rock customers finally appeared confident that they could leave their savings with the crisis-hit lender, with few, if any, expected to queue outside branches yesterday.

Government pledges to protect the savings of the bank's account-holders quelled the panic triggered by news that Northern Rock asked the Bank of England, Britain's central bank, for an emergency loan on Friday.
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