Deutsche Bank says haircuts may cause credit crunch

Before considering further measures to stabilise the euro zone politicians and regulators should consider the cumulative impact of proposals such as forced recapitalisation, a transaction tax and writedowns on bonds.”We need to find the right balance between stricter regulation of the financial sector and the impacts these have on the economy as a whole,” Ackermann said.Given the robust performance of the German economy so far, Deutsche Bank currently sees no need to tighten lending requirements for German companies, he said.Ackermann’s warning comes as Europe’s economic engine faces slowing growth in many of Germany’s top export markets as governments rein in spending to bring down high debt levels.The German government expects gross domestic product growth of 3 percent this year, which would provide vital economic stimulus to a euro zone that has become increasingly dependent on Germany as the debt crisis intensifies.Germany’s most high profile banker said it is doubtful whether a blanket recapitalisation of European banks - a measure being considered by politicians in Germany and France - would help solve the sovereign debt crisis.”It’s not the capital position which is the problem, but the fact that sovereign debt as an asset class has lost its risk-free status,” Ackermann said.”They key to the solution is therefore in the hands of governments, to restore confidence in the solidity of state finances.”