The banking crisis this month in Saxony, south-eastern Germany, has hit the region’s standing as one of the country’s most dynamic economies, business representatives, politicians and analysts have told the Financial Times.

Sachsen LB, Saxony’s troubled publicly owned bank, was this week bought by LBBW (Landesbank Baden-Württemberg), the larger Stuttgart-based public Landesbank, for at least €300m ($409m), after Sachsen LB was unable to handle its exposure to volatile credit markets.