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Italy Set for SHOWDOWN with Germany Over Deutsche Bank’s Rescue Package


  • Italy Set for SHOWDOWN with Germany Over Deutsche Bank’s Rescue Package  
    RELATIONS between Germany and Italy are set to hit breaking point, if Berlin’s steps in to rescue Deutsche Bank, after blocking Rome from doing the same earlier this year.

    Angela Merkel’s government has been put in a supremely awkward position by the crisis playing out at Germany’s biggest lender, which some experts say will not go away without a state bailout.

    And Italian prime minister Matteo Renzi is no doubt paying very close attentions as events unfold. The leader has reportedly begged Germany to let him loan cash to Italy’s banks, as investors have increasingly lost confidence in the institutions, which are saddled with billions of pounds worth of bad loans. In particular, Italy’s oldest bank Monte Dei Pasche has looked close to collapse several times this year, and Mr Renzi is still trying to secure a £4.2billion (€5bn) cash injection from investors for the lender.

    But it’s thought Berlin has so far been unyielding and told Mr Renzi that he must abide by new EU rules, which mean savers and small investors must take a hit before governments are allowed to use taxpayer money for capitalisation. Such a move would have been akin to political suicide for the Italian prime minister.

    Now Germany is faced with its own banking crisis, as investors flee Deutsche Bank amid concerns it can’t afford a looming fine from US authorities. Berlin also made a huge faux pas when it fanned the flames of the fire with claims that it would not provide state assistance. The comments saw the bank’s share price fall to new record lows last week and put the lender in an even more fragile position.

    The situation is particularly embarrassing for the German government, which has long lectured other eurozone countries over how to deal with financial crises.

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October 6, 2016 - Posted by | Economics, GeoPolitics | , , , , , , ,

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