German banks dodge financial squeeze

The World

A long line of ATM machines is busy at this Sparkassen bank. Among the people here are this retired couple, who says this bank has made him feel safe even during this crisis. An astounding 50 million Germans have Sparkassen accounts, more than half the population. The Sparkassen are about as old fashioned and risk free as banks can get: they take your deposit and lend it to businesses, local brick and mortar businesses. The Sparkassen don’t earn much and neither do its account holders. The Sparkassen aren’t very racy, and that’s what makes this Sparkassen representative smile. He says in tough times like these people honor solid business models. The Sparkassen banks have been experiencing millions of new deposits in the past couple weeks. So the Sparkassen are now awash in credit. Still Europe’s biggest economy, Germany, is entering a recession. If consumer spending drops, that could knock out the Sparkassen’s main source of income, the small business owner. Christmas sales will be decisive, says this business owner. German frugality runs deep. Prudent has always been part of our behavior, says this Sparkassen representative.

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