Foreign forces advance in a ruined Germany. It is the state of the German banking system today

(To David Rossi)
15/05/19

A dossier runs on the tables of the chancelleries and of the editorial offices of financial newspapers throughout the West - and not only - and is classified, because only to talk about it is the chills: there is a European country that for decades has not included in its budgets the liability towards de facto and de jure third parties subject to their own guarantee. And it has hidden under the rug - in the formal respect of the rules - the beauty of 4.700 billions of euros, over the 120% of GDP, while the indebtedness of the first and third bank of the Country exceeds abundantly the 1.800 billions of Euro and the exposure of the first credit institution on derivatives is equivalent to the astronomical figure of 48.000 billion, fourteen times the country's GDP. Now, that country is the Bundesrepublik Deutschland, Germany.

For months, media around the world have been reporting on attempts to save Deutsche Bank and Commerzbank, the two banks mentioned above, from the risk of a crisis with no way out. The merger has been shelved, recalling the words of former Volkswagen president Ferdinand Piëch: "Two sick people in a bed don't make a healthy person". Unicredit, ING and some French credit institutions have begun to explore an acquisition. It should be noted that the shareholders of the two banks are almost the same: important Anglo-Saxon investment funds; with the significant difference that Commerzbank is for the 15,6% owned by the German Government, which obviously has its hands tied because it cannot endorse operations that entail significant job losses. It is the German model of participation of the federal State, the Land (the regions) and the associations of workers on the boards of directors and the shareholders of large companies which in this, as in other cases, shows its own limits: it is not realistic to ask to the fingers of one hand which would prefer to be amputated by the limb ...

Time runs: Fitch, who in September 2017 downgraded Deutsche Bank bonds from A- to BBB +, in June 2018 and again in February 2019 confirmed the negative outlook, just two steps away from classification as "junk bonds" . Not that Commerzbank is much better ...

In Berlin, the merger (the merger) still likes it, also to defend German banks and companies from China's aims. The eventual arrival of an Italian, French or Dutch "white knight" would be experienced as a lesser evil, in order to avoid traumatic incursions of the Celestial empire, as in the case of Geely climbed without a shot being fired at Daimler's 10%1 or the Chinese state power company that came to control the 20% of one of the four German electricity grid operators. The question is not whether Berlin will want to defend Germany and, indirectly, Europe: for months, Angela Merkel's government has been working on a bill aimed at ensuring that the executive has the power to block extra-EU investments - even if only 10% - in companies in strategic sectors, such as infrastructure, defense and security. No, the doubt is how much and even if it can do it.

Now, do you remember how the so-called Great Depression began in September, 2007, of which the world in general and Europe in particular still carry stigmata? The 13 September 2008 Lehman Brothers had negotiations underway with Bank of America and Barclays for the possible sale of the company. Within twenty-four hours, however, Barclays withdrew its offer, while the interest of Bank of America collided with the request for federal government involvement in the operation. The next day the Dow Jones index marked the biggest meltdown of what followed the September 11 attacks: the failure of Lehman was the biggest in history, surpassing the crash of WorldCom in the 2001. Lehman had bank debts amounting to around 2002 billion dollars and bond debts for 613 billion dollars, a total amount equivalent to the 155% of US GDP in the 5.

Of course, Berlin would not repeat the mistake, mindful of the forty billion pounds offered by the British government to troubled banks in the 2008. Here, however, we are not talking about 40 or even 600 billion, but over 1.800. Would the German government have the financial and political strength to do so and also to impose on European partners to help out, given also the situation of the actual indebtedness of the Nation and the spread of sovereignties? Faced with offers from Beijing of the order of hundreds of billions, would the German tax payer prefer to pay the bill for bankers and entrepreneurs out of his own pocket, in order to guarantee the independence of the German country system? Would the Italian tax payer realize that abandoning Germany to its destiny is equivalent to sawing the branch on which it is sitting?

The writer, in reality, would be afraid to ask this question to the Italians if it were just to save one of the "systemic" banks of our country, let alone the German ones ...

1 Commenting on the operation, Geely's president, Li Shufu, had told state television that the investment would serve to "support the growth of the Chinese automotive industry" in the framework of "national strategies".

Photo: web / David Shankbone