Yves here. One of my colleagues is back from a month in Europe (a lot of travel, and lots of meetings with economists and political types). I need to debrief him more fully, but his short take was Portugal is clearly in crisis, with Spain and Italy not far behind, and that the political train wrecks will hit faster than the economic ones. Although I can’t see how the former won’t accelerate the arrival of the latter.
By Delusional Economics, who is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from http://www.macrobusiness.com.au/2013/07/is-europe-recovering/“>MacroBusiness
As Greece goes on strike again, I’m reminded of just how long I’ve been covering the Eurozone crisis and how the underlying issues within the monetary union constantly bubble to the top, but are yet mostly unaddressed. For those who maybe new to the topic you can read my previous posts on the fundamental issues. Here and here for a start.
In short, the single monetary policy across the zone led to a situation in which interest rates for one set of nations, namely France and Germany, were incompatible with the economic stability requirements of many others. On top of this the lack of counter-balancing floating exchange rate under the single currency made the issue far worse. Free-flowing capital, cross border banking, lack of macro-prudential control and basic corruption and greed did the rest. The resulting financial and real asset price booms that this created eventually imploded leading to some countries with large overhanging debts, in main part, to the banking systems of other euro-using nations.
That has been the battle-ground of the Eurozone over the last few years with two major themes playing out. Firstly debtor nations have been forced, in most cases very unwillingly, to implement large adjustments in fiscal policy along with structural reforms in an attempt to make their economies more competitive relative to their neighbours. The aim was to create an export-led revival and allow them to slowly pay-down existing debts. Secondly, creditor nations have , again mostly unwillingly, provided promises of capital to support this re-balancing while attempting to hide the fact that their own banking systems were a major driver of the imbalance in the first place and now are heavily encumbered with poorly performing assets.
Obviously, as I have posted on many times, I have major issues with the way in which European authorities have handled this crisis. Its attempted resolution has been far too one-sided, ideologically driven, at times wandering into fairy-land in expectation management, monetary and fiscal policy are out of alignment, the lack of swift resolution of non-performing assets has been a major failing as has the inability to implement something closer to a fiscal and banking union. That’s not to say it has been a complete failure, there is some evidence that a re-balancing is slowly taking place, but without far more support from creditor nations in accepting further responsibility for the issues at hand, this is a very slow and painful process and is therefore at risk of stumbling at any time, for many different reasons.
Moody’s latest warnings on Cyprus is as good an example as any:
The risk of another default by Cyprus over the coming years remains elevated, according to a report by Moody’s Investors Service.
The ratings agency says this is due to very substantial risks to the country’s economic performance and, as a result, the government’s finances.
This is reflected in the negative outlook on the Caa3 rating of the government. Although it is not the rating agency’s central scenario, Moody’s sees a material risk of a Cypriot exit from the euro area, which is captured in the Caa2 country ceiling.
There are a number of inevitable outcomes from all of this, the most obvious being large rises in unemployment and banking system issues in nations force to “re-balance” via internal devaluation. The other is the domestic political issues generated as the economies of debtor nations retrench.
This month it was Portugal’s turn:
Portugal’s borrowing costs have spiked dramatically after key political parties failed to agree on a national salvation front, raising the risk of a snap election and an anti-austerity revolt.
Yields on 10-year Portuguese bonds jumped more than 100 basis points to 7.85% in a day of turmoil Friday, kicked off by a government request to delay the next review of the country’s European union, International Monetary Fund and European Central Bank “Troika” bailout until August. President Anibal Cavaco Silva set off a constitutional crisis on Thursday when he vetoed a reshuffle by the two conservative coalition parties, insisting on a red-blue national unity government with greater legitimacy to see through austerity cuts until mid- 2014. Socialist leader Antonio Jose Seguro has so far refused to take part, demanding fresh elections to clear the air. “We must abandon the politics of austerity, and renegotiate the terms of our adjustment program. The prime minister must accept that his austerity policies have failed,” he said.
Some Socialist leaders have threatened debt repudiation as a way of fighting back at Germany and the creditor powers, though that is not the party position.
Standard & Poor’s downgraded Banco Comercial, and placed a string of banks on negative watch. The agency appeared to endorse warnings that austerity overkill was making matters worse, saying continued fiscal cuts “are eroding the resilience of the private sector.”
It said banks were building up a “high volume of problem assets.” ricardo Santos from BNP Paribas said it was unclear whether Portugal could withstand a further €5-billion ($6.8-billion) of cuts ordered by the Troika. “The bottom line is that the policy is not reducing the debt ratio. We think public debt will reach 130% of GdP in 2014. The country is near the tipping point,” he said. “Everybody has been saying that Portugal is so different from Greece, but if this political crisis goes on for long, that won’t be so clear any more.”
Nothing new here really in terms of economics, although I will note that Portuguese yields have actually been rising since mid-May. That point aside, I’ve been warning for quite some time that Portugal is heading down the same path as Spain and Greece. The continued attempts to suck greater amounts of wealth out of the private sector as government sector revenues plummet is creating a self-defeating dynamic that we’ve seen time and time again across southern Europe.
What’s new here is that the political strain of trying to implement this ridiculous strategy has once again blown up a national government, and the markets know that without a “troika-friendly” parliament the monetary backstop provided by the ECB becomes questionable sending yields up and making the underlying issue of debt sustainability even worse.
The Portuguese political parties have given themselves a dead-line of this Sunday in order to re-form a workable government. That is possible given the numbers, but it’s only one more year before Portugal is supposed to exit its existing bailout program, and it is already behind in terms of meeting targets.
Again this highlights the unrealistic policy implementation as prescribed by the Troika, and Portugal is very unlikely to be the last nation to find itself in political strife. Having said that creditor nations certainly aren’t immune to the political fallout either, because it is their banking systems that were a major part of creating the problem. This is why we continue to see German politicians push against a banking union as it would allow non-German oversight of domestic banks, something they desperately want to avoid:
German Finance Minister Wolfgang Schaeuble on Friday rejected the proposal by the European Commission for a European Resolution Board that would, from 2015, have the power to shut down struggling banks.
In an interview with the German daily Bild, Schaeuble said the proposal rested on “shaky foundations.” The newspaper also said that Schaeuble has sent a letter to EU Internal Market Commissioner Michel Barnier in which he characterizes the proposal as “very risky.”
“What we need now is a trustworthy and legally justified solution,” Schaeuble said in the interview. “The decision to close a bank is a decision with widespread consequences which cannot be taken by Brussels on its own,” the minister stressed.
Earlier this week, the German government argued that the Commission was overstepping its competence and risked delaying the implementation of an European banking union.
As I mentioned last week, I believe this is a ploy by the German government to protect its own banking system’s secrets. Just this week, in the lead up to the German election, Mr Schauble himself appeared very keen to support a move to sell down his governments’ interest in Commerzbank.
Overnight the bank managed to unload a small proportion of its trouble loan book to Wells Fargo, but the lack of transparency in the transaction has done little to appease concerns that the bank is in far worse shape than is being reported:
Sure, it’s nice to see that a couple of outsiders were willing to pay something close to book value for a block of the bank’s loans. But this is small potatoes. The latest sale covers less than 1 percent of the assets on Commerzbank’s balance sheet. (The German government still owns a 17 percent stake in Commerzbank after bailing out the bank in 2009.)
Because the transparency of Commerzbank’s financial statements is so poor, investors can’t see if Commerzbank might have sold its best loans and kept the worst ones stashed on its books at inflated historical values. During the 1980s U.S. savings and loan crisis, this practice was known as “gains trading,” although the term doesn’t fit this situation, given that Commerzbank is recording a loss. To be fair, the lack of transparency at Commerzbank isn’t unique. It’s a problem at most large banks, especially in Europe.
So this is the battle ground I described above. Creditor nations have little interest in implementing any policy that would provide support to non-domestic banks because by doing so could expose issues within their own banking systems. However, without these types of unions, and the support mechanisms that come with them , debtor nations struggle alone with the consequences of internal devaluation and while trying to build export markets against neighbouring nations also trying to do the same.
It must be said, however, that it isn’t just austerity that can bring down a government. As I noted above corruption and greed also played their part in this mess as Mr Rajoy is reminding us this week:
Spain’s Prime Minister Mariano Rajoy faced calls to resign Sunday over a slush fund scandal roiling his ruling Popular Party.
The issue blew up again after the publication of friendly mobile text messages he purportedly sent to the disgraced treasurer at the heart of the affair.
The leader of Spain’s main opposition Socialist Party, Alfredo Perez Rubalcaba, said he was severing all contact with the prime minister and his party.
“Given the unsustainable political situation in Spain, the Socialist Party calls for the immediate resignation of Mariano Rajoy as head of the government,” he told reporters in Madrid.
And more from Reuters:
Spanish Prime Minister Mariano Rajoy on Monday rejected calls to resign over a ruling party financing scandal and said he would not allow the matter to hold back his reform plans.
The political pressure mounted on Rajoy as the former treasurer of his center-right People’s Party gave new testimony before a judge looking into the affair, saying he had made 90,000 euros in cash payments to Rajoy and party secretary-general Maria Dolores Cospedal in 2009 and 2010.
Rajoy had so far managed to limit the impact of the scandal, which involves alleged illegal donations by construction magnates that were supposedly distributed as cash payments to party leaders in return for juicy contracts.
“I will defend political stability and I will fulfill the mandate given to me by Spanish voters,” he told a news conference.
Yet another political story to keep your eyes on.
In other news overnight the German ZEW showed German investors were a little more gloomy while Italy showed an improvement in its balance of trade. We’ve got European PMIs coming in early next week, so hopefully we will continue to see some improvements in those numbers.
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“I believe this is a ploy by the German government to protect its own banking system’s secrets.”
Even if your farfetched and prejudiced conspiracy theory was true, so what? Do you want to blame the German government for not trusting Bruxelles with even more power now? What has the EU done to overcome the crisis, really? A big fat nothing, they left that unrewarding job to the Germans! Thx for nothing. Anyway, to surrender even more authority to the Eurocrats is as totally unpopular in Germany as it is in Spain, Portugal and Greece. Forget about it.
Instead, we should focus on the Eurozone instead. You yourself imply that the North and the South don’t go well together. Since that’s obvious, it’s ridiculous to suggest that the solution to that should be that the largest economy in Europe, representing 80 million people, should sacrifice itself to make life easier for the South! The only reasonable conclusion can be that there have to be two different Eurozones. It’s high time for the governments to start talking about this!
Where does it say Germany should sacrifice itself?
Nobody asked Germany to sacrifice itself. But Germany will not allow peripheral nations to resolve their own banking systems, as the fallout would precipitate the inevitable crisis in the insolvent core German banks.
Essentially Germany is barring the escape exits in the burning building that has become the euro.
@OMF
Domestic elites within the PIigs will not allow their credit banking systems to go under despite the fact they are extractive.
Germany is a excuse.
Trade sanctions that will follow is actually needed in absurdly open to external capital and goods economies such as Ireland.
PS
Although I find the threat of EU trade sanctions against Iceland for taking the Mackeral stocks interesting.
The Icelandics are simply taking Mackerel that do not hang around Irish coastal waters anymore for whatever reason.
The EU nightmare supermarket state is using this as a excuse to throw its weight around the gaff.
Claiming they are overfishing.
Its a growing darkness – this EU market state.
They will not stop until we are all dead or serfs without even the dignity to cut turf or fish and stuff.
@ Gray
What a load of self-deluded nonsense you peddle.
One thing’s for sure, and that’s when it comes to national mythologies, the American exceptionalists have absolutely nothing on the German exceptionalists.
You have no idea what you are talking about. Just where do you think Portugal, Spain, Italy, Greece, Ireland, and most of Eastern Europe got all those loans from? That’s right! From German banks that decided it was easier to shovel out the money to earn some commissions rather than do the due diligence required to ensure the money could be repaid. Just like our foreclosure crisis here. And since banksters had the fiduciary duty to actually do due diligence, they are more at fault. Anyone can ask for money, it’s your job as the bankster to actually evaluate if they can pay the loan back. None of these “bailouts” of the South have gone to the people or their governments. They are pass-throughs right back to the German banks that are INSOLVENT. Banks such as Commerzbank, Allianz, and Deutsche Bank. You’re making the people of the South suffer to cover up your insolvency.
Yves,
Is it possible that the austerity being imposed on Greece, Portugal etal will ONE DAY (hopefully not too far in the future) will enable one of the countries to just call it a day in the Euro? If yes, when do you think it is likely to happen?
It will never happen in Portugal. They’re nice people and all that, but they have a high tolerance for pain (Portugal is extremely high in inequality in Europe). Their euphemistic Prime Minister, Pedro Coelho (Peter Rabbit), is representative of the national ethos.
I suspect that, in the long run, you will be proven wrong. When it comes to governing ideologies, they don’t come much more pathological than neoliberalism.
As Andrew M. Lobaczewski observed in Political Ponerology:
Personally, I don’t perceive the people of Portugal as far along on the learning curve as the people of Spain. But that does not mean they will not, given enough time and experience, get there.
That’s a nice quote. It is kind of obvious that if the people filling all the managerial positions are both uncaring *and* grossly incompetent, that the system is going to be overthrown eventually.
Btw, contrary to what you imply it was the Commerzbanks own management which so despreately wanted to repay the state’s credits in order to get the official watchdogs off their necks! Imho an egomaniac and very questionable decision that doesn’t make much sense economically. You shouldn’t blame Schäuble for losing confidence in that management and wanting to get rid of the state’s shares as soon as possible! As finance minister, he has to safeguard the taxpayers’ money, after all.
Two things. 1. Schaeuble was just in NY a couple of months ago with (I asssume) a simultaneous delegation of European bankers redressing all of those fraudulent securities they were sold by US banksters – the same meeting Jeffrey Sachs attended. We have heard no report on the outcome of this meeting, but in this post we now read that Wells Fargo bought up a bunch of bad “loans” from Commerzbank – at full price no less.
2. Also curious is that while Schaeuble was in NY he held a press conference where he clearly stated that “we are overbanked” meaning we need to get rid of a few banks…. so now Schaeuble is warning the EC that a European Resolution Board would be a dangerous maneuver? Why. It would consolidate the zombie banks and eliminate some. Doesn’t come together.
So question: Can Wells Fargo now sell those “loans” it bought from Commerzbank to the Fed?
All this blah, blah, blah, and not one mention of Monetary Sovereignty (http://mythfighter.com/2010/08/13/monetarily-sovereign-the-key-to-understanding-economics/), the lack of which is the cause of the euro’s failure.
Hey Rodger, while you’re here, could you please unban me from your site? I’ve often wanted to answer some of your questions but, alas, could not.
No biggie if you decline.
Well said.
This is in fact the key point, that well-meaning academics and liberal reformers who want to “help” to solve the eurozone crisis refuse to understand.
See the recent version of the “Modest Proposal” (one of the links of yesterday at NC) as an instance of this.
But what about some of the thinkers who are truly bold and unorthodox — folks like Franz Hörmann — and their theories?
Thanks for the link Mexico. It’s good to know a little more of the critique than before. Financialisation seems a case of a false and energy draining control system to me, in Soddy’s terms a perpetual motion machine blag. The current system is closely connected with the ancient leadership myth. The hold this has on people is massive – just one example is the great affection so many have for the British royal family.
The interesting thing about the PIIGS is how much they look like Germany between the wars. Oligarchs with their money outside the countries, very high unemployment, problems with foreign exchange and governments finding it tough to raise capital for productive investment (even to give to various entrepreneurial cronies as the Nazis did).
Soddy said he didn’t approve the Nazis, but was exasperated by democracy. Money is clearly a control system and it can make no sense to have this run by secretive, private banks in a manner that prevents genuine democracy, but it seems unlikely that any of the old ways can be allowed in any dream system – including private property, inheritance and motivational reliance on greed and money accumulation.
We are missing something about just how bent the money system is and why it is we can’t just agree to work out what needs doing and get people doing it. I never see a radical analysis that starts with what it would be sensible to establish as social capital across the globe and why any of this relies on or even could work with 1% getting 80% of the honey with compound interest on it.
That they try to tell us that the Irish, Greeks, Spaniards, Italians and Portuguese are idlers instead of putting a transparent system in front of us all to vote for, suggests politics is stuck in the 1930s.
For those like me who don’t speak German, the bi-lines on this video are much better than those on the video linked above:
http://dotsub.com/view/24f791d7-a027-4f65-b57b-79728fccd151
In a mere 500 years since the advent of the Renaissance and the Reformation, we’ve seen four great world hegemons rise and fall in quick succession: Spain, Holland, England and the US. So even though it may be accurate to say that capitalism has contributed to some great feats, stability is not one of them.
If you can lay your hands on a copy of Jonathan I. Israel’s The Dutch Republic: It’s Rise, Greatness, and Fall 1477-1806, you might find the chapter titled “The Breakdown of the Habsburg Regime, 1549-1566” to be interesting. Israel speaks of the pervasive use of interest-yielding renten which were sold in the Netherlands to finance Spain’s imperial adventures, which led to a financial crisis in the Netherlands, which eventually led to revolt against Spain.
A similar phenomenon happened within Castile which J.H. Elliott explains in some detail in Imperial Spain: 1469-1716, culminating in the crisis of the 1590s
It’s amazing how the same phenomenon of financialization and the rise of a parasitic rentier class keeps happening time and time again, with the same disastrous results. We don’t seem to learn from experience.
Not unsurprisingly, the Spanish ruling class responded to their failure of leadership and the economic implosion by expelling the Moors from Spain:
That’s why I believe Golden Dawn and other culturally chauvinistic parties operate very much in accordance with preserving TPTB, despite their faux populist rhetoric to the contrary.
No doubt From Mexico you recall all the experts from the U.S. not happy with how we Mexicans were handling things. How has that worked out?
Just like Hugh points out of Gray (who posted the first comment on this thread), you get the battle lines drawn in the wrong place. It’s not about Portuguese vs. Germans, or Mexicans vs. Gringos, it’s about, quoting Hugh, the “rich and political elites on the one side and its 99%s on the other.”
What part of money can be issued as Equity don’t people get? It solves just about every problem we have with money except restitution for the current system.
A move by the PRESIDENT of Portugal!
In a parliamentary system, a political action by the President is a very big deal. It’s the equivalent of a political action by the Queen in the UK.
In a parliamentary system, the President’s responsibility as head of state is to represent the country as a whole and maintain its stability, which usually means butting out and letting the Parliament and the Prime Minister run things.
If the President has decided that government-as-usual by the status quo politicians is injurious to the stability of the country, that is a very big deal, and kudos to the President of Portugal for noticing. He may have no idea how to fix it, but at least he’s noticed that the status quo is leading to disaster.
The Queen in the UK did not notice when a similarly dangerous situation arose in her country. The President of Ireland did not notice when a similarly dangerous situation arose in that country. Etc.
Gray devolves the discussion from the outset seizing upon the hallowed class war tactic of setting up a false conflict, Germany against Europe, to hide the true conflict, that between Europe’s rich and political elites on the one side and its 99%s on the other.
He forgets, perhaps deliberately, that German workers were looted in the Hartz “reforms”, not by profligate Southerners but by and for the benefit of their own ruling classes who via German banks used this and other looted wealth to blow bubbles in the South.
Gray rails against the strawman that “Germany” should be asked to sacrifice itself. Here too he conveniently forgets that, after the collapse of these bubbles, any aid coming from the North, from “Germany”, goes South only to return immediately back North in a backdoor bailout of German banks for all those bad loans they made in the South. I would agree with Gray that I can see no reason why ordinary Germans should have to recapitalize their insolvent predatory banking system. I would disagree with his implication that this task should be foisted on to the 99%s of Southern Europe. My view is that Europe’s 1%s created this mess through their speculations. They not only have the wealth but the responsibility to fix it. They will of course do everything in their power to shirk this responsibility and to hold on to their looted wealth. So it will be up to Europe’s 99%s to repatriate this stolen wealth and use it for the benefit of all. If Gray wants to lead this charge, more power to him.
“Its attempted resolution has been far too one-sided, ideologically driven, at times wandering into fairy-land in expectation management, monetary and fiscal policy are out of alignment, the lack of swift resolution of non-performing assets has been a major failing as has the inability to implement something closer to a fiscal and banking union. That’s not to say it has been a complete failure, there is some evidence that a re-balancing is slowly taking place, but without far more support from creditor nations in accepting further responsibility for the issues at hand, this is a very slow and painful process and is therefore at risk of stumbling at any time, for many different reasons.”
In other words, the whole thing is a freegin’ swindle. Countdown to Europe finally getting around to reading the Federalist Papers and understanding the notion of sovereign credit elevating national posterity (versus imperial monetarist scam crushing it) and seizing central banks all the way up to the ECB for the sake of issuing said credit in 3, 2, 1…
Per Europe’s so-called “fiscal policy,” if it’s out of wack, then looks like the financial transactions sales tax need be increased. How hard can that be?
Dear gods I hope they’re not reading the Federalist Papers, lest they take #10 to heart and gin up a stupid culture war or twelve.
Ah yes,
Another American with major issues on how the Europeans (add in say another 175 nations) are handling things. Whats that they say about glass houses and stones? Wisdom on economic probity from the land of Geitner and Rubin. Its a bit rich no? Natch.
For gods sake, the author, and also most of the viewers here, are not at all happy with Geithner&Friends either. You wont find pretty much anyone on this blog who is supportive of them.
Feel free to critique Geithner: Asshole deserves it.
But that doesnt mean we cant critique Europe.
Of course Americans can and do critique Europe and everyone else. There are of course many European commenters with more nuanced and far more useful takes on the situation than this article. One month talking with a few experts not the same as an expert who is European and actually works and lives in the space. Yes, yes I know all you americans are such experts and know everything with your know how and so on…..
You know, there is really no problem with you disagreeing with people or the article, but if you’ve got an article to link us to or a more nuanced European point of view to contribute on the situation, please do so. Re-read your posts and reflect for a moment. They aren’t nuanced at all. Just telling us how we don’t understand and we’re wrong and the article is wrong and we’re ignorant Americans isn’t saying anything – at all – it’s hurling cannonballs. Links, please! I’d read them. Or tell us why the article is wrong!
Reading comprehension fail.
The author is Australian, as is clearly flagged at the top of the post.
>The author is Australian, as is clearly flagged at the top of the post.
As is not, actually.
Well of course if he is Australian it changes everything? This changes my point how?
If it doesn’t change your point of view, given your entire screed was anti-American and how we couldn’t possibly understand your nuances, then you were just ranting and aren’t here for a discussion or worth any furtherance of one.
I think these problems are a bit like trying to learn chemistry from religious books in the cold. We would be better off with a fire and start again from observation and experiment. Much we call debt is just a historic control system with no moral support, the drag of economic rent. Though I want a radical solution and the end of the super rich and crony network, I doubt we need that much change because most of us play no part in the ‘motivations’ of this small world of the rich.
Money can be issued as Equity, not just as Liabilities. What is it about “sharing” that people don’t get?
The part of sharing that makes people focus on something other than their own greed. Most people havnt gotten past the fact that the world doesnt revolve around their own material desires. And not only that, they also dont understand that sharing would benefit them alot more than allowing the 1% to hoard everything like a hamster.
Debt or Equity *Creation* that has – claims on the future – as a Maxim… will ultimately fail… space and time are the only factors… to designation.
skippy… seems we are at warpo factor magnitude 10+ due to human activity’s (POP) and multipliers (faster – more efficient – machines et al).
” Gut Feeling ” first time in live in 1977
http://www.youtube.com/watch?v=gYwL3SmcnB4
“Sharing” places no necessary claims on the future while money lent into existence does since that money must be repaid with real interest.
” Sharing ” with – all forms of life – or the processes that enable life… sure.
skippy… Greed is the Penultimate [executioner of] Truth see Philip K. Dick. Ahhh the “The Mold of Yancy” too…
The Robots
http://www.youtube.com/watch?v=okhQtoQFG5s&feature=fvwp&NR=1
Bonus vid
The Way of All Flesh by Adam Curtis
http://www.youtube.com/watch?v=C0lMrp_ySg8
mike .D 3 months ago
the recognition is for the tumor of a dead woman ..weird that anyone would want to benefit financially from this..maybe that is genetic !
About German opposition against oversight of domestic banks:
I believe “delusional economics” misses part of the picture.
Simply put there´s is a huge fight going on within the German banking community. On the one hand you have Deutsche Bank (with half hearted support by the other commercial banks) and on the other hand you have public and community based banks. Traditionally the public and community based banks have played a huge role in Germany. Much bigger than in other countries. They have more than half of the retail business and finance a large part of the German “Mittelstand”. The first blow against them was struck when Deutsche and her allies managed to get the EU commission to deprive them of the guarantees of their public owners and thereby increasing their refinance costs. (All inthe name of “fair” competition” of course) That happened in the early 2000´s and not incidentally coincided with making the selling of industrial assets by the big banks tax free. You read right. Schroeder (the German Clinton) allowed banks like Deutsche to sell their shares in Daimler et al which they had acquired decades ago to sell without taxing a cent.
So Deutsche (and to a lesser extent Commerzbank) embarked on an Anglosaxon trajectory. All was very well and the German press full of praise until the crisis hit. Sudddenly the old and supposedly boring public institutions looked very good indeed. And these institutions kept growing and acquiring market share.
Since then though Deutsche has started to look at the retail market again. Now the new ploy is to get the mutual insurance fund of the public banks (which is healthier than healthy) included into the European bail out mechanism and thereby (albeit indirectly) attacking the public banks again. Ever since the public institutions have been crying murder and – as it is an election year – Schäuble just can´t let that happen.
In my reading that is the true background of what is unfolding. Everybody is quite happy to blame Brussels and nobody says a word of the undue influence of Deutsche (and the other big commercial banks in Europe) on the commission and on Berlin as well. A disgusting spectacle and high time that Deutsche is dismembered and some people jailed. Which won´t happen of course.