Deutsche Bank has long been something of a basket case. In 2007, when the first signs of the impending financial crisis began to appear, it was the most highly leveraged bank in Europe, with assets 68 times its Tier 1 capital. It narrowly managed to avoid sovereign bailout in the financial crisis, but it was a principal beneficiary of the US government’s bailout of AIG and it receivedliquidity support from the Fed and the ECB. But its problems weren’t limited to US subprime and toxic derivatives. The Icelandic journalist Sigrún Davíðsdóttir reports that Deutsche Bank had lent extensively to Icelandic banks and was left with the toxic loans when the Icelandic banks failed.
.. Deutsche Bank also turned out to have sizeable interests in Ireland’s teetering banks. When the Irish property market collapsed, the Irish government – partly at the EU’s insistence – bailed out its banks to prevent a chain of contagion spreading out across the Eurozone and risking the solvency of the large European banks such as Deutsche Bank.
.. The ECB’s Securities Markets Program helped Deutsche Bank and others unload their toxic Greek debt (and other dodgy sovereign debt) at better than market rates. Guess who holds it now? Yes, the ECB does – and the ECB is of course backed by taxpayers. Yet another disguised bailout for Deutsche Bank.
.. To me, Deutsche Bank looks very much like the archetypal “too big to fail” zombie bank – draining money from central banks, sovereigns and investors while giving little in the way of returns.
.. Though admittedly it is far from being the only European bank in this condition.
Opinion: Merkel Must End Devil’s Pact with America
The US began systematically spying on the German government at least since 1999 (perhaps even earlier); in other words, two years before the attacks on New York and Washington. It is questionable that the German Agricultural Ministry’s fisheries department, which the NSA also spied on, had anything to do with Osama bin Laden or al-Qaida.
.. It wasn’t security of the Western world that concerned the Americans. Instead they pursued their own interests, unscrupulously vying for slight political advantages in diplomatic dealings and in the struggle for economic prosperity. The reference to the terrorist threat has long become a fig leaf for habitual and brazen espionage.
.. But through her silence, Merkel has made the German government complicit. She allowed the law to be broken. She also permitted the principles that characterize open, democratic societies to be compromised.
The German government had the wrong priorities. There is no guarantee of security. Fear of an attack is no reason to sacrifice legal principles.
Germany’s Destructive Anger
But when the German economists spoke at the final session, a completely different tone took over the room. Within the economic theories and numbers came a moral message: The Germans were honest dupes and the Greeks corrupt, unreliable and incompetent. Both parties were reduced to caricatures of themselves. We’ve heard this story throughout the negotiations, but in that room, it was clear how much resentment shapes the views of German economists.
.. It reminded me that in German, debt, “schuld,” also means moral fault or blame.
.. When I asked if any had visited Greece to assess poverty, brain drain and business closings, they simply shook their heads.
.. For it seems that their sense of victimization has made them lose their cool, both in negotiations and in their economic assessments. If the Germans are going to lead Europe, they can’t do it as victims.
The Eurozone’s Damaging Deal for Greece
So the tragedy is not only that the Greek debt crisis has no end in sight, but that instead of the one-for-all-and-all-for-one ethic that was supposed to govern Europe, the rancorous talks showed a roomful of national leaders with sharply differing conceptions of what to do about a bankrupt fellow member.
.. Germany and its allies have driven a hard bargain, but in forcing Greece to submit they have not resolved the crisis of the monetary union or advanced the European project.