Does Deutsche Bank need state aid?
Deutsche Bank Chief Executive John Cryan has rejected claims that the financial institution needs to be bailed out with public funds. The US Department of Justice recently demanded 14 billion dollars from Germany's largest lender to settle claims related to US mortgage securities. Commentators suspect that taxpayers will have to pitch in the end and that the German government's tough stance in the financial crisis will now backfire.
Irony of fate for Deutsche Bank
The German banking system is no longer the safe haven of stability in Europe, Jornal de Negócios comments:
“It is a tragic irony that the biggest threat to the stability of the European financial system is coming from Germany, the very country that has been preaching to its European partners about stability and solidarity for years. Deutsche Bank is a mammoth institution in the world of global high finance, with total assets of around 1.6 trillion euros. … Its CEO [John Cryan] says the bank is solid as a rock and doesn't need any help from the government. But the Portuguese know from experience what such public affirmations can herald. … And should state intervention become necessary after all, it will be interesting to see how the German chancellor and her finance minister extricate themselves from their own orthodoxy regarding the application of bail-in rules they imposed on other countries.”
Merkel has tied her own hands
The Eurozone's strict rules and the German chancellor's implementation of them are plunging Europe's finance sector ever deeper into crisis, the Daily Mail complains:
“The underlying reason for Deutsche Bank's weakness - and that of most of the continent's banks - is the eurozone's failure to follow Britain's painful example in rescuing and recapitalising its financial system after the credit crunch. Therein lies a bitter irony for Angela Merkel: after refusing to allow the Greek and Italian governments to bail out their banks and restructure their debts, for fear of undermining the sacred one-size-fits-all euro, she finds herself hamstrung over rescuing her own financial sector. Isn't this the curse of the EU writ large? With countries forbidden to act in their national interests, stagnation sets in - and everyone suffers.”
German government harming the banks
The German government's flawed bank policy is mainly to blame for Deutsche Bank's crisis, La Tribune criticises:
“When German politicians praise the healthy state of the credit unions and savings banks that finance the small and medium-sized businesses, it's nothing but hot air. Because such financing is too weak and leads to a surplus of savings that migrate to the big banks, causing the problems we are all familiar with. To restore the health of the German banking system this attitude in particular must change, notably with a renewed commitment to investment - particularly on the part of the government. If the German federal government doesn't mend its ways and clings to its position of mercantilism it will forever face such banking risks. Contrary to what the German leaders are saying, Deutsche Bank's problem is not proper to the bank alone. The problem is a political one.”
Help from taxpayers shouldn't be for free
If Deutsche Bank really is facing bankruptcy the German state have to help it out - but only under one condition, writes taz:
“Although Deutsche Bank will no doubt end up paying a lot less than 14 billion the row with the US is further proof that Germany's biggest credit institute is falling apart. Even if it isn't about to go bankrupt it would be well advised to prepare for the worst-case scenario that goes by the name 'bankruptcy'. … The Lehman Brothers bankruptcy serves as a warning: the collapse of this little investment bank unleashed such chaos in 2008 that a major global economic crisis ensued. So the state must help out if the Deutsche Bank gets into serious difficulties. However this help must not be given for free, but reimbursed with shares. In this way the state would become the owner of the bank - and could wind its business up at its own pace.”
The motor of the economic miracle stalls
Ultimately taxpayers will have to foot the bill, De Volkskrant warns:
“How can the zombie bank be saved? The politicians and the media have long agreed: Deutsche Bank must become German once more. Boring and dignified, the bank that lends money to the world's export champion. ... Must the state now step in and help the bank? ... It needn't come to this. 2016 is not 2008: the economy is in a much better state. Perhaps Deutsche Bank can up its capital reserves by selling shares. And even if that doesn't work the reports that the German government has ruled out the possibility of a bailout must be taken with a grain of salt. ... The German economy will not be left at the mercy of the Anglo-Saxon corporate banks. Berlin will think twice before it kills the motor of Germany Inc. Taxpayers should brace themselves accordingly.”
Bank needs new business model
The US Justice Department's claim poses severe risks for the bank, Delo warns:
“It's hard to predict what repercussions the US's demand will have on the economy of Germany and other countries. The IMF has already voiced fears of a system crisis. Germany also still needs a bank with an international profile that is there for German businesses around the world, as chancellor Merkel's CDU has stressed. Hopes are still high that Deutsche Bank will be able to 'Daimlerise', that is to develop a successful business model on the ruins of the old one. If it can't, what will happen is anyone's bet.”