BERLIN, Aug 3 (Reuters) The German government is facing cross-party political pressure to cut the stake that state bank KfW holds in IKB, the troubled lender that nearly tipped the country's banking sector into crisis.
KfW, which generally funds development projects, owns 38 percent of IKB and pledged earlier this week to take responsibility for an 8 billion euro guarantee given by the troubled lender for now uncertain US investments.
The plan to use state funds to support a bank that got into trouble by investing in the U.S. subprime mortgage market has drawn criticism from opposition politicians and a senior finance policy figure in Chancellor Angela Merkel's conservatives.
''The KfW should pull out,'' said Volker Wissing, finance policy spokesman for the opposition Free Democrats (FDP). ''It is not the KfW's business to take stakes in private banks that take substantial capital market risks.'' The FDP also wants to know the exact role at IKB of Joerg Asmussen, a senior finance ministry official, who sits on the bank's supervisory board. Asmussen was not reachable for comment.
The debate over the state's role in helping IKB gives extra resonance to a controversial government review of rules on defending strategic industries, with a view to protecting some companies from the influence of foreign state funds.
Some investors and economists have warned that far-reaching measures could spell a new era of protectionism.
Steffen Kampeter, spokesman on budget policy for Merkel's conservatives, criticised the decision for the KfW to grant IKB the 8 billion euro credit guarantee.
''A private sector support solution would have been better,'' said Kampeter, adding that the KfW should offload its IKB stake.
The KfW credit pledge was part of a rescue of IKB brokered by Finance Minister Peer Steinbrueck, bank watchdog chief Jochen Sanio and other industry figures after it emerged IKB had racked up billions in potential losses in U.S. subprime mortgages.
Merkel's conservatives share power in an often uneasy coalition with the Social Democrats, one of whose deputy chairmen is Steinbrueck.
Bickering within the coalition over the response to IKB's strife could further reduce the government's zeal for reform, which has already begun to wane as the parties begin to look ahead to the next federal election, due in 2009.
Finance Ministry spokesman Torsten Albig rejected the pressure for the KfW to pull out of IKB: ''Those are misplaced calls,'' he said.
REUTERS RS KP2220
KfW, which generally funds development projects, owns 38 percent of IKB and pledged earlier this week to take responsibility for an 8 billion euro guarantee given by the troubled lender for now uncertain US investments.
The plan to use state funds to support a bank that got into trouble by investing in the U.S. subprime mortgage market has drawn criticism from opposition politicians and a senior finance policy figure in Chancellor Angela Merkel's conservatives.
''The KfW should pull out,'' said Volker Wissing, finance policy spokesman for the opposition Free Democrats (FDP). ''It is not the KfW's business to take stakes in private banks that take substantial capital market risks.'' The FDP also wants to know the exact role at IKB of Joerg Asmussen, a senior finance ministry official, who sits on the bank's supervisory board. Asmussen was not reachable for comment.
The debate over the state's role in helping IKB gives extra resonance to a controversial government review of rules on defending strategic industries, with a view to protecting some companies from the influence of foreign state funds.
Some investors and economists have warned that far-reaching measures could spell a new era of protectionism.
Steffen Kampeter, spokesman on budget policy for Merkel's conservatives, criticised the decision for the KfW to grant IKB the 8 billion euro credit guarantee.
''A private sector support solution would have been better,'' said Kampeter, adding that the KfW should offload its IKB stake.
The KfW credit pledge was part of a rescue of IKB brokered by Finance Minister Peer Steinbrueck, bank watchdog chief Jochen Sanio and other industry figures after it emerged IKB had racked up billions in potential losses in U.S. subprime mortgages.
Merkel's conservatives share power in an often uneasy coalition with the Social Democrats, one of whose deputy chairmen is Steinbrueck.
Bickering within the coalition over the response to IKB's strife could further reduce the government's zeal for reform, which has already begun to wane as the parties begin to look ahead to the next federal election, due in 2009.
Finance Ministry spokesman Torsten Albig rejected the pressure for the KfW to pull out of IKB: ''Those are misplaced calls,'' he said.
REUTERS RS KP2220
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