Recession: Deutsche bank crisis in Germany



Recession is not limited to Nigeria only. It is a global problem that has reared its ugly head in Germany, the power house of the European Union (EU).

Deutsche Bank and the German state

Notwithstanding its name, Deutsche Bank was always purely a private bank. However, its history is closely bound up with the emergence of Germany as an economic and political great power, and all of the problems, crises and crimes connected to this. Since the bank’s founding in March 1870, its interests and those of the German state have overlapped. In its founding statement, the bank set itself the goal of “finally conquering a position for Germany in the field of financial transactions…” The cornerstone was thus laid for the financing of imperialist expansion in Asia, Africa and South America.

Along with international expansion, Deutsche Bank financed leading industrial concerns such as Krupp, Siemens, Mannesmann, Bayer, BASF, AEG, Thyssen and several mining concerns. Under its guidance, the merger of Daimler and Benz was carried out in the 1920s, as well as the merger of Aero Lloyd and Junkers to form Lufthansa. Its directors and board members were represented on the supervisory boards of many companies.

Implications of Deutsche Banks crisis

While investors and analysts around the world fret about Italy’s banking crisis, there is an even bigger problem hiding in plain sight that just might trigger the next financial collapse; Deutsche Bank.

Last week, Deutsche Bank reported €256 million (Dh1.04 billion) in net profit for the first half of 2016, marking an 81 per cent decline from the €1.38 billion reported in the same half of 2015. Profits for the second quarter alone were €20 million — down 98 per cent from the €818 million recorded in the second quarter of 2015.

For a bank of its size (Deutsche Bank’s investment arm represents one of Europe’s biggest investment banks), this spells trouble, if not the beginning of a long domino effect comparable to the one Lehman Brothers started.

The Lehman Brothers analogy might be misleading, though, because Deutsche’s assets dwarf Lehman’s — the former has €1.8 trillion in assets whereas Lehman, for all the damage it started, had $600 billion (€537 billion) in assets.

The disturbing figures

After a record loss of €6.8 billion in the 2015 business year, Deutsche Bank’s shares have plunged in value by 35 percent in the first weeks of 2016, reaching their lowest level since 2008. By comparison, even in the year of the 2008 financial crisis, the bank’s losses amounted to only €3.9 billion. The bank’s share price, which at one time was above €100, is currently moving between €13 and €16.

Amid sharp drops in the stock prices of other European banks, leading financial newspapers are reporting “panic on the markets” and “the return of fear,” and asking if the world economy stands on the brink of “the next crash.”

Since Nigeria is part of the financial world, it has a larger implications to our economy. Our government must be worried about this ddeveloomen.

Sources: World socialist web, Gulf news



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