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Euro Debt Crisis to Extend Into 2011, German Banking Group Says

The sovereign-debt crisis in Europe will extend into next year and private investors should participate in future bailouts, according to Andreas Schmitz, president of the Association of German Banks.

The crisis “will remain, as will concern about the stability of the euro,” Schmitz, whose group represents banks including Deutsche Bank AG and Commerzbank AG, told reporters in Frankfurt yesterday. He welcomed plans by politicians to make private bondholders share the cost of bailouts.

European finance ministers yesterday ruled out immediate aid for Portugal and Spain or an increase in the region’s 750 billion-euro ($1 trillion) crisis fund, counting on the European Central Bank’s bond purchases to calm markets. A week after handing Ireland an 85 billion-euro lifeline, the finance chiefs voiced confidence that Spain and Portugal will tame their budget deficits and said the existing credit line is enough to defend them in an emergency.

The European bailout fund “will suffice” to tackle the sovereign-debt crisis and public discussions about enlarging it are “counter-productive,” said Schmitz, who is also the chairman of the management board at HSBC Trinkaus & Burkhardt AG, the German bank controlled by HSBC Holdings Plc. He said he’s not in favor of introducing joint euro-region government bonds in the long term as that would mean transferring Germany’s creditworthiness to other nations.

Schmitz said he’s “convinced” German lenders will be able to cope with new banking rules by the Basel Committee on Banking Supervision and that he doesn’t expect a credit crunch within the next 12 months.

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