Daily Management Review

Deutsche Bank asks for €150 billion-worth bailout


07/11/2016


Problems of Italian banks, escalated after Brexit, are getting worse day by day. Bad debts of t360 billion can trigger a complete collapse of the banking sector. Now, however, Deutsche Bank has become the main risk.



Björn Laczay
Björn Laczay
Italian Prime Minister Matteo Renzi said that he is unilaterally willing to spend billions of euros to support the banking sector, even without Brussels’ approval. In turn, the German Chancellor Angela Merkel, as well as other supporters of the Eurozone’s austerity measures, are unlikely to enjoy the initiative.

Above that, there was something else Renzi said about other European banks. In particular, he noted that they have a lot more problems than the Italian.

"If the non-performing loans are the number one problem, the problem of derivatives with other banks is a hundred times worse. This is the ratio, one to a hundred," - he said.

The Italian prime minister apparently means trillions of dollars of derivatives on Deutsche Bank’s balance sheet.

It should also be noted that the banking crisis has already come close to Germany. Bremer Landesbank appeared on the verge of collapse, although the volume of distressed assets is only 29 billion euros here. At the same time, Deutsche Bank’s chief economist David Folkerts-Landau acknowledged the problem and called for implementation of the multi-billion dollar program to rescue European banks.

In an interview with Welt am Sonntag, the economist said that European financial institutions should obtain new funds for recapitalization after a similar financial assistance in the United States. He, however, did not say that the US program was implemented almost 10 years ago, and Europe at that time promoted the "prudent" fiscal and monetary policy.

He notes that the US helped their banks with $ 475 billion in total, and this program is needed in Europe, especially for Italian banks. In other words, Deutsche Bank’s representative believes that Europe must follow the United States.

"Europe is seriously ill and needs a quick solution of the problem, or it will face a collapse" - said the economist.

According to him, bailout of Italian banks will require at least 40 billion euros. The problem is so acute that Deutsche Bank’s economist is convinced of the need to violate the existing European rules.

At the same time, it is absolutely unacceptable write-off deposits and use other methods that would hit savings of people, since it would paralyze the banking sector in Italy and other places. People no longer simply trust the banking system.

Surprisingly, when it came to Cyprus and Greece, few people worried about the citizens’ savings. Economists, analysts and officials have insisted that preservation of stability is the key issues, and, therefore, something has to be to sacrificed. However, once Italy and Germany found themselves in the crosshairs, the time to "change the rules" has suddenly come.

The only question is whether David Folkerts-Landau is really worried about the Italian banks, or he is concerned about fate of his employer?

Most likely, if the largest bank in Germany support a policy change, Merkel and Schaeuble’s resistance will soon be broken. This means that Pan-European bank bailouts will start, most likely, at the expenses of taxpayers.

source: zerohedge.com






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