How Far Will America's Subprime Virus Infect Europe?

The New America Foundation welcomed Steffen Kampeter from the Budget Committee of Germany’s Bundestag for a discussion of the far-reaching effects of the American sub-prime mortgage crisis and the subsequent breakdown of financial markets.  Patrick Doherty, Deputy Director of the American Strategy Program, moderated the session.

Herr Kampeter briefed attendees on the general state of economic affairs in Germany and throughout the European Union, along with the European reaction to the sub-prime crisis.  He stated that in spite of slowing trends in growth, stability remains a strong feature of most European economies.  However, as financial markets feel the strain of the credit fallout, Europeans are now witnessing several rescue scenarios come into play, particularly in Germany & the UK, and even in financially savvy Switzerland, as major firms face possible collapse.  While the crisis continues to run its course, questions of accountability and regulation are brought to bear against open markets and competition.  

Kampeter stressed that while the real market has not yet felt the full force of the blow, the problem-solving endeavor to minimize the negative spillover effects must take place as an international effort, focused to sustain liquidity to markets and to restore trust in the financial system.  No single nation can fully remedy the problem on its own.  In the debate over increased regulation, Kampeter asserted that a combination of internal self-regulative measures along with regulatory legislation should be enacted.  He also cautioned that immediate action is not necessarily helpful, diplomatically affirming the critical stance of the EU against the Fed bailout in the US.  His most notable criticism came against the American legal situation which allows the proffering of credit to unworthy borrowers, maintaining that the German housing market, while less profitable, is much more stable due to more strict lending requirements.

- Andrew Bolden 

Participants

• Steffen Kampeter
  CDU Majority Leader, Budget Committee
  Member, German Bundestag

• Patrick C. Doherty
  Deputy Director, American Strategy Program, New America Foundation
  Editor-in-Chief, The American Strategist