THE writing is most definitely on the wall for Europe’s largest bank, with the kiss of death being delivered over the weekend when German industrialists lined up to publicly state their total confidence in Deutsche Bank, describing it as having a ‘solid base’ and a ‘good future’, with BASF chairman adding that: ‘We stand with Deutsche Bank.’
They are forced to stand with Deutsche because they know full well that they are going to sink with it when the inevitable happens and it crashes under the weight of its massive debts.
It is not the first time this year that Deutsche has been forced to publicly deny that it is on the verge of collapse. In February, the bank announced that it was ‘rock solid’. Then the German finance minister, Wolfgang Schaeuble, was wheeled out to calm fears saying ‘No, I have no concerns about Deutsche Bank’ while studiously avoiding providing any evidence to justify his optimism.
Since February, the crisis engulfing the bank has dramatically increased. In September news broke that it had been fined a massive $14 billion (£10.5 billion) by the US for its involvement in the mis-selling of mortgage securities in America, mis-selling that was a major factor in the world banking crash of 2008.
This fine is proving to be the final straw for a bank that last year reported its first annual loss since 2008 and warned it was heading for a further loss in 2016. In total, Deutsche has ‘assets’ of 1.6 trillion euros and liabilities that total 1.58 trillion euros.
On paper, the bank has a net value of 60 billion euros but only a small proportion of these ‘assets’ have to turn bad for the value of the bank to be wiped out completely. And Deutsche, in common with every other bank, has a shedload of risky loans parcelled up as assets.
Already its share price has plummeted, along with other major European and British banks, to such an extent that it is now believed to be worth only £20 billion. Not for nothing has the International Monetary Fund described it as the ‘most dangerous bank in the world’ and warned back in June that Deutsche ‘appears to be the most important net contributor to systemic risks’.
The danger to the entire world banking system flows from the fact that Deutsche sits at the centre of a spider’s web of bank deals, known as derivatives, which involve packaging toxic assets and trading them between banks. When Deutsche crashes, it brings the rest down with it.
The response of Deutsche has been to rush to the annual conference of the IMF being held in Washington this week to beg the US to massively reduce the fine. But even if the US cancelled the fine it will not save the bank.
At the same time, it has appealed to Chancellor Angela Merkel for a state bail-out, something that Merkel has politically committed herself never to do – a commitment that she is currently forcing on the Italian government as it desperately seeks permission to bail-out its own bankrupt banking system.
Merkel will be forced to bail out Deutsche in a desperate attempt to stave off the inevitable crash. As Deutsche sinks and takes the rest of the world’s banks with it, every capitalist country will be forced to do the same.
These are bail-outs that the capitalist class intends to force the working class to pay for through austerity cuts far exceeding any that have gone before. No matter how much the Tories try to convince workers that they will relax on austerity, the impending crash makes it imperative for the capitalist class internationally to dump the full weight of it on the backs of workers and their families and there will be no exceptions.
The issue for the working class is to end this anarchic system through the victory of the socialist revolution, replacing it with a socialist society where the banks, along with all industry, are expropriated and placed under the control of the working class as part of a planned socialist economy.