The federal government presented last week a €500-billion plan to support the German banking system in the wake of the financial crisis. Up to now, the scheme has attracted little concrete attention. Only one bank, the public Landesbank BayernLB, announced it will need a €5.4-billion bail-out, following an estimated €1-to-3-billion loss in 2008.

Some banks did say they will examine the proposal, but most of Germany’s credit institutions rejected the offer, saying they had no need for state financial help. The plan, put together by the Finance Minister, Peer Steinbrück, allows for public guarantees on bank loans and recapitalization of banking institutions. So, is the government’s estimate on the banks’ needs completely off the mark? In actual fact, it’s probably just a question of time for the German financial groups to start using the state’s helping hand. According to a recent research report by economists at Merrill Lynch, European banks will need to be recapitalized by an amount of around €73 billion. Deutsche Bank alone will need €8.9 billion of fresh capital, the report said. Moreover, the business newspaper Handelsblatt argues that in the next 12 months German public and private banks, including the cooperative credit institution DZ Bank, will need to reimburse and possibly refinance some €370 billion worth of loans. The estimate is based on data provided by Bloomberg News. Some banks face particularly costly reimbursements in the next year or so: €65 billion for Commerzbank, €42 billion for Landesbank Baden-Württemberg, €20 billion for Deutsche Bank. After all, German credit institutions may well find the government’s help handy. In a difficult market environment and while banks suffer an image problem, state guarantees may be indispensable in order to launch new bonds next year.