EU Reporter

The latest developments in the European theatre of the global economic crisis bear some, if only faint, echoes of the continent's dark past.

One might think from some of the comments we are hearing that Germany, being less affected by the financial crisis, is seeking to take advantage of it's position as the EU’s largest single net-contributor.

Chancellor Angela Merkel’s reaction to the bail-out plan was not unless Germany was in control. Does she seek to make British banks surrender to Frankfurt sixty-three years after WWII? The innuendo suggests a back-door strategy through which the Euro would be introduced in the UK.

Chancellor Merkel stayed firmly clear of being drawn into a 300 billion euro bail-out package for European banks ahead of last weekend's gathering of European G8 member states in the Elysee Palace.

Such a proposition had been leaked by the French government but later was withdrawn when the German government outright rejected it. This, at least, was the official version circulated on the eve of the conference in Paris last Saturday.

When speaking with a member of the German delegation on condition of anonymity after the Press conference in the Elysee EU Reporter learnt that it was not so much French's finance minister Christine Lagarde's proposal for a European bail-out fund that was so outrageous to the German government but rather that it was not to be under German control.

The high ranking advisor to Chancellor Angela Merkel commented that if Germany was to be the largest contributor to such a bail-out package it would only agree if it was in the driver's seat. This position was also reflected in Chancellor Merkel's statement as broadcast on the BBC last night.

Above all, there is strong sentiment in Germany and its government that the financial crisis can be blamed on the misbehavior of the American and Anglo Saxon banking model and that German banks only got into trouble because of the chain letter-style of investment schemes involving mortgage backed securities.

Such overvalued securities fed the real estate bubble in the US, UK, Ireland, Spain, Malta, Bulgaria and Poland. That the bubble eventually burst amid rising interest rates, for which last but not least the Frankfurt based European Central Bank (ECB) can be blamed, should come as no surprise. The ECB has a record of stubbornly refusing to lower the base rate, citing defeat of inflation as a main objective.

However, German banks have also participated in “misbehavior” across the Atlantic and across the Channel but may be less affected. Although the finance ministers of the Euro - zone had agreed on a common approach, the demand for a 300 billion bail-out package financed by a flat rate 3% of GDP, which was also championed by Italian Prime Minister Silvio Berlusconi, did not win approval.

This was mainly because at the insistence of German finance minister Peer Steinbrueck who said that Germany as the largest economy in Europe would not "continue to be a net contributor unless it was in control of the funds".