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August 21, 2009

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Germany's FM defends bailout of ailing lender

GERMANY'S finance minister yesterday defended the government's efforts to shore up troubled lender Hypo Real Estate at the height of the financial crisis, telling a parliamentary inquiry it made "the right decisions."

Finance Minister Peer Steinbrueck dismissed suggestions by opposition lawmakers that the government botched the rescue effort for the company, which it moved to nationalize this year.

Hypo Real Estate Holding AG, the most prominent German victim of the financial crisis, ran into trouble last September after its Ireland-based unit Depfa Bank Plc failed to find short-term funding amid the widening credit crunch.

A 50 billion euro (US$70 billion) bailout deal emerged from two rounds of late-night weekend talks between the government and private banks. Opposition lawmakers have charged that the government went into the talks poorly prepared, giving the banks an advantage.

Steinbrueck countered that the government acted "appropriately and correctly" to prevent the risk of a "meltdown of the global financial system."

"We had to act in real time, under enormous time pressure - and with not always complete information," he said. "We made the right decisions."

Steinbrueck said his chief negotiator and deputy, Joerg Asmussen, was "hard as nails" in the talks. He dismissed as "absurd" opposition suggestions that Asmussen was inadequately prepared.


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