Upon invitation by the Allianz Cultural Foundation, the economic, research and political experts debated the topics of government rescue packages, the free market and future regulation of the international financial sector.

Peer Steinbrück did not spare the audience with critical as well as self-critical maxims. Politics have cut back on the regulation of corporate finance since the 1980s – resulting in a worldwide recession. “We got caught in the deregulators’ trap,” said Germany’s Minister of Finance

Politics intervened in part too late and, to some extent, not decisively enough, he acknowledged. However, Steinbrück passed responsibility for the crisis directly on to listeners in the auditorium as well. According to him, every person – such as an investment banker – who sells financial products on the basis of promised double-digit returns without keeping an eye on the risks bears a share of the blame for the crisis.

Steinbrück’s counterpart as Minister of Finance in Luxembourg, Jean-Claude Juncker, detects a dangerous herd instinct within the financial sector as having caused the bubble to form, and he did not stint in his criticism of converted market liberals who now are calling for more government action: “Wall Street has become the new seat of the Comintern,” he commented.

According to Juncker, at the same time the crisis also offers an opportunity to accelerate the political and economic unification of Europe and to harmonize the general financial framework within the euro zone. The prime minister of Luxembourg is calling for a “global government” which would have to specify standards for the future, and he quoted former German Chancellor Helmut Schmidt: “Financial markets require rules.”

Steinbrück became even more explicit than Juncker. It is typically German that an antagonistic perception of the two words “market” and “government” has asserted itself over the past few years. “However, this has nothing to do with an either/or constellation, but rather a both/and sequence.” To rule out past excesses and their current costs by means of new market regulations for the future is “blatant political pragmatism,” the minister said.

Michael Heise also advocates new market regulations which preferably are applicable on a global scale. Similar to Steinbrück in this respect, the Allianz Group’s Chief Economist also takes aim at regulatory arbitrage dealers who export their capital to tax havens and multiply it at the same time. However, Heise is calling for both European and globally applicable regulations for the financial sector primarily because, on the one hand, uniform standards with clear parameters for internationally operating financial institutes would reduce bureaucracy and, on the other, these could impede and curtail the formation of bubbles on the capital market from the start. Accordingly, an “upgrade of the G8 world economic order” to a larger institutionalized “club on a G20 level” would stand to reason, says Heise.

Economic historian Harold James advises against the establishment of a new institution for regulating the financial sector: “One needs only reform what already exists. The newly industrializing countries must be given more weight, and we have to upgrade the IMF and bring India and China to the table,” James said.

Overall, major agreement prevailed on the podium regarding the measures to be undertaken. The crisis cannot be battled effectively without new debt, the experts claim. James stated that there was no alternative to state intervention: “Probably, not all of us have become Marxists due to the crisis, but we are all Keynesians.” Since the government’s current plans are becoming tangible in respect to earmarking the savings of future generations, the experts are calling for drafting what is as far as possible a clear and binding exit strategy in order to prevent individual economies from being trapped in a spiral of debt.

Chief Economist of Allianz Group. Honorary professor of the Johann Wolfgang Goethe University. Former Secretary-General of the Council of Experts for the Survey of the Macroeconomic Development.

British Historian and Author; Professor of European Economics at Princeton University; Coeditor, "World Politics" magazine.

Prime Minister and Minister of Finance in Luxembourg; President of Eurogroup; Governor of the IWF as well as Governor of the European Bank for Reconstruction and Development.

Federal Minister of Finance since November 2005; Vice Chairman of the Social Democratic Party of Germany; from 2002 to 2005 Minister President of North Rhine-Westphalia.