Germany’s DOUBLE crisis: Conflict-plagued regional banks threaten to destabilise Merkel

Wednesday, July 26, 2017
By Paul Martin

ANGELA Merkel is facing tough choices over structural problems in the economy as Germans head to the voting booths in September.

By JON ROGERS
Express.co.uk
Wed, Jul 26, 2017

ANGELA Merkel may have dodged a financial bullet with the Deutsche Bank but her regional lenders are struggling to emerge from troubles which began 10 years ago.

While Deutsche Bank emerged from plummeting share prices last year, the less publicised issues surrounding the country’s Landesbanken appear to be of greater structural concern.

The regional banks are owned by the federal states and were set up in the post-war economy.

They have traditionally leant to the country’s ‘Mittlestand’ industrial companies, providing wholesale loans and capital with the security they were backed by local governments and therefore a safe and secure investment.

But the banks have suffered a double hit which has been felt for more than a decade.

The European Commission deemed unlimited guarantees from states to Landesbanken amounted to illegal state aid, cutting off a highly profitable side to their business model.

Then the banks suffered especially harshly in the financial crisis as American securities – which the Landesbanks were major investors in – crashed in 2008.

The banks have yet to really fully recover.

The Rest…HERE

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