Britannia Radio

This is a major slide into slump.  Germany doesn't lack sovereign 
reserves and outside the eurozone would doubtless have used them .  
But German politicians can see their assets disappearing into the 
double sink that is Esatern Europe and the Mediterranean countries.

And just to make it more difficult they have a general election 
beginning to have its effect with new parties on the very left and 
very right making for instability.
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TELEGRAPH 30.4.09 Brother
Germany contracts 6pc as eurozone bank deposits fall at fastest rate 
since Depression
Germany has slashed its growth forecast, admitting in an embarrassing 
volte-face that the economy will contract by 6pc this year in the 
worst recession of any major country in the Western world.

By Ambrose Evans-Pritchard

Economy minister Karl-Theodor zu Guttenberg said the slump was almost 
entirely due to the collapse of exports, insisting that a "global 
revival" will restore growth next year.

Even this may be too optimistic. The International Monetary Fund 
expects a further 1pc contraction in 2010. Left Party leader Oskar 
Lafontaine said Berlin seemed to be hoping and praying that other 
countries would "pull the German economy out of the mud", sitting on 
its hands as unemployment reaches 4.6m next year.

Professor Tim Congdon from International Monetary Research said 
company bank deposits in the eurozone have begun to contract at rates 
not seen since the early 1930s, threatening severe damage in coming 
months unless the European Central Bank shifts gears fast.

"It's a catastrophe. Company bank deposits have been falling at 1pc a 
month since December. It is what happened in the US during the Great 
Depression, and it is why we are seeing such a horrific recession in 
Europe now," he said.

Fresh ECB data shows that the M3 "broad" money supply has fallen 
slightly since the start of the year, though the annual rate growth 
rate was still 5.1pc in March. Loans to businesses and households 
have fallen more sharply.
Mr Congdon said the true decline in credit and M3 money had been 
distorted by "conduits" and off-book instruments used by banks. While 
the Bank of England has taken steps to adjust for this distortion, 
the ECB has not.

"They are taking the data at face value. The effect is disastrous. 
They must act to increase bank deposits for the whole economy," he said.

The central banks of the US, Canada, Japan, and Britain, among 
others, have already begun purchasing assets to inject stimulus into 
the economy.
The ECB has so far resisted the move, despite a growing rift between 
the German-led hawks in Frankfurt and some national governors. The 
members from Spain, the Netherlands, Austria, Greece, and Cyprus have 
all said "credit easing" may be necessary.

The ECB is expected to discuss the possible purchase of debt 
securities at its next meeting in May, but Bundesbank chief Axel 
Weber said policymakers must be careful not to blur the lines of 
fiscal and monetary policy. "There is only a very limited scope for 
the euro-system to be involved in the purchases of government 
papers," he said. [This could be the fatal flaw in the eurozone in 
that the ECB cannot directly intervene in national economies -cs]

The problem is entirely political. The ECB has the treaty power to 
buy eurozone debt on the secondary market. Germany fears any such 
move would be a slippery slope towards an EU debt union in which 
northern taxpayers might end up shouldering Club Med debts.