Savings banks and Landesbanken in the German political economy: The long struggle between private and public banks

The author highlights the political vulnerability of public banks with the example of German public banks. He introduces the reader to the traditional structure of the German banking system, the role of the public banks therein, and the relevance of this structure for the German production regime. He then traces the conflict between private and public banks as the latter increasingly competed for the same business. The conflict stalemated in the national arena until the European Single Market project was launched. This offered the private banks the opportunity to bypass the strong opposition in Germany. As European competition law presumes that all actors act like profit-maximizing private investors, the state liability guarantee for German public banks was considered to be an unfair competitive advantage. Under the dictates of the European Commission, this guarantee had to be withdrawn by the year 2005.