Credit crunch

In a video message broadcast on the Internet on Saturday, Chancellor Merkel said the credit situation was becoming “critical” in Germany.

She said she would meet with banking industry leaders in Berlin on next week to avert a possible credit crunch for medium and large businesses.

"We must note that we are in very critical situation," the chancellor said in the online speech recorded in her office.

"We will speak with the representatives of financial institutions about what we can do to avoid a credit crunch that would put the brakes on economic recovery," she added, referring to the meeting scheduled for Wednesday.

Merkel acknowledged that it was right for banks to be careful, but urged them not to be too hesitant in lending money. She also reminded them that as service providers to the economy, they also had a responsibility towards the whole of society.

"That is why we will say very clearly that they must fulfil this function," Merkel said.

Merkel, who embarked on her second term at the helm of Europe's largest economy, warned that the economic crisis was not over yet, saying, "I am counting on the sense of responsibility of everyone who wants to help our country."

She said the government would appoint a "credit mediator" to speak for businesses who were having trouble obtaining loans at reasonable rates.

According to the weekly newsmagazine Der Spiegel, Berlin is also planning a large-scale package of measures to avert the looming credit crunch.

Business leaders, representatives of trade unions and banks as well as academics are expected to attend next week's meeting at the chancellory.

rb/dpa/AP
Editor: Kyle James