GERMANY - The German Private Equity and Venture Capital Association (BVK) has called a paper outlining the German ministry of Finance's (BMF) stance on Germany's new private equity law "a total disappointment".

The German Federal government is currently embroiled in an internal feud over the basic conditions for Germany's upcoming private equity law, set to be passed in tandem with the corporate tax reform next year.

Dörte Höppner, managing director at the BVK, alleges the BMF is only interested only in stimulating venture capital so is penalising private equity firms who serve little or no macroeconomic purpose just as the Federal Ministry for Economic Affairs (BMWi) is asking for a general private equity law.

"The BMF's proposals have nothing to do with a private equity law, they just regulate a part of the industry," said Höppner.

That said, the organisation welcomes a general private equity law, she added.

"At the moment, it is still uncertain if the fiscal transparency for all funds - meaning [private equity firms] all are rated as asset managers, which is one of our main demands - will be implemented at all," continued Höppner.

The BMWi recently criticised the BMF's proposals for the new law, putting its possible implementation on January 1 2008 under further pressure.

But the BMF believes a complete private equity law will lead to tax losses of between €15bn and €20bn, though the BMWi says it cannot not "reconstruct" these figures.

The BMWi also argues conditions set out by the BMF would not ascertain fiscal and regulatory conditions for Germany's ability as an international competitor.

Elsewhere, it appears Germany's pledge to put the dangers posed by hedge funds on the agenda of the upcoming G8 summit in German Heiligendamm has failed.

German chancellor Angela Merkel said she wants "transparency" in the way hedge funds operate to prevent a meltdown of the entire global financial system should one or more of the funds collapse.

However, the US and Britain, where most of the funds are based, reject the idea of regulating the sector.