Monday, October 06, 2008

Ja? Nein? Well. maybe...Merkel in a Muddle

The world financial turmoil has not been helped by the apparent announcement over the weekend that the German Government was guaranteeing all private savings deposits. Ireland and Greece have already done so, but the decision of the European heavyweight would be much more significant. But hang on a minute. At the weekend, Mrs Merkel said, "We tell all savings account holders that your deposits are safe. The federal government assures it."

It now appears that this is a political assurance, not a legal one, reports the BBC website today. No new legislation will be passed in Germany. In fact, it's no different from the assurance offered by Alistair Darling last week.

Unfortunately financial markets thrive on rumour and speculation, not ambiguity. Just like in business, leaders have to make it very clear what they mean. Many of the news websites are still reporting that Germany has given a legal guarantee that savers money will be protected, and stock markets are acting on the news. It would be a shame if things got worse simply through a communication failure, wouldn't it?

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