Europe risks a new banking crisis says David Folkerts-Landau, chief economist at Deutsche Bank. He suggests a huge EU bailout program. Private creditors should not participate.
“Europe is seriously ill”
Rules prohibit state aid. However, bail-ins are not politically feasible because it would take out a lot of private savers in Italy, and possibly even trigger an onslaught of creditors and customers of the banks. “Strictly to keep to the rules would cause greater harm than they suspend them” said Folkerts-Landau.
The decline in bank stocks is only the symptom of a much larger problem, namely a fatal combination of low growth, high debt and a proximity to dangerous deflation. “Europe is seriously ill and needs to address very quickly the existing problems, or face an accident,” said the chief economist.
Question of the Day
Is David Folkerts-Landau more concerned about Italian banks and Italian savers or the repercussions that a collapse on an Italian banks would cause Deutsche Bank?
I suggest the latter.
Regardless, the entire European banking system is on the verge of collapse, starting with Italy. Deutsche Bank’s derivatives mess is nothing to sneeze at either.
- “Italian Gov’t Collapse More Than Just a Possibility”
- Italy Threatens to Defy Merkel, Brussels Over bank Bailouts.
- Diving Into Deutsche Bank’s “Passion to Perform” Balance Sheet.
- A Furious Italian Prime Minister Slams Deutsche Bank As Europe’s Most Insolvent Bank
- The EU Cannot Survive as a Prison
- Spain’s Social Security Program Will Go Bust in 2018
Get Out Now!
Mike “Mish” Shedlock