Three months ago, the International Monetary Fund issued a warning regarding Deutsche Bank. The IMF then believed that the German back poses a potential systemic threat to the entire global financial system. Deutsche Bank is Germany’s largest lender and one of the biggest banks globally. The troubles it is now facing could cause a domino effect of a different kind. One that would not make itself felt in the financial sector, but that would reverberate in society. The situation with Deutsche Back could lead to a nationalist backlash in what is already fertile ground for that.
Support for Deutsche Bank
The International Monetary Fund warned three months ago that Deutsche Bank posed a potential systemic threat to the global financial system. Today the problems facing Germany’s largest lender are fueling a different kind of risk: that of a growing nationalist backlash in Germany.
Peter Ramsauer is the chairman of the economics committee in the German parliament. On Monday he gave an interview where he spoke his mind about the situation facing Deutsche Bank. The politician did not hold back from using strong words regarding the fine that the German bank has to pay. Over their securities business backed by mortgages going back as far as the financial crisis, Deutsche Bank has to pay a fine of $14 billion. Peter Ramsauer called the fine “extortionate” and said that it “has the characteristics of an economic war.”
Markus Ferber, another German politician, suggested that the investigation into Deutsche Bank looks like revenge for Apple. Recently, the European Commission decided to send Apple a 13 billion euro tax bill. That’s $14.6 billion that Apple has to pay.
German executives also spoke out in defense of Deutsche Bank. Juergen Hambrecht is the chairman of BASF, one of the largest companies on the DAX. He said that “German industry needs a German bank that accompanies us out into the world”.
Not Taking the Blame
Germany could choose to place some of the blame for the $14 billion fine on the bank’s management at the time and the decisions they took. But many Germans would much rather let nationalistic sentiment take over. It is perhaps easier to see Deutsche Bank as a victim in this situation. It fits well with a certain narrative that outside interests are threatening Germany’s institutions, standards and traditions. Previously, opposition on issues such as genetically modified foods and the Trans-Atlantic Trade and Investment Partnership (TTIP) turned into policy red-lines.
Mainly, criticism from Germany targets the European financial system. The very system that Germany helped create. The European Central Bank gets the blame for hurting Deutsche Bank, which in turn hurts German savers. The ECB is also criticized for financially supporting debt-ridden governments on the periphery of the euro zone.
Germany has attacked the ECB on its policies before. The ECB’s policy of buying bonds has been challenged at Germany’s Constitutional Court. However, the court ruled in favor of the European Central Bank. Lately, criticism of the ECB has increased. For the second time ever, European Central Bank Governor Mario Draghi spoke in a closed session before German lawmakers last week. He defended the ECB’s policies, even in the middle of the Deutsche Bank situation.
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