Bailout of Deutsche Bank Would Kill Angela Merkel’s Political Career

Bailout of Deutsche Bank Would Kill Angela Merkel’s Political Career

EUROPE 05:34 02.10.2016

A government bailout for Germany’s major financial institution Deutsche Bank would exacerbate political hardships for Chancellor Angela Merkel, who recently has been under fire for the refugee crisis mishandling, and could be facing the end for her political career, German media reported.

On Wednesday, Die Zeit wrote that the German authorities rushed to develop a plan of state aid package to the bank, as its shares hit a record low of $10 a share amid a standoff with US authorities.

Deutsche Bank is struggling to deal with $14 billion in taxes that the US Department of Justice had put on it for selling bad mortgage-backed securities. The burden of taxes has nearly brought the bank to the verge of collapse.

However, the German finance ministry declined rumors it is preparing a bailout plan for the institution on Wednesday.

According to Frankfurter Allgemeine, such a bailout is unlikely from Berlin given the current political situation in both the EU and Germany. The allocation of a state aid package to Deutsche Bank would backfire on Germany, which has consistently pushed other EU nations to forgo assisting their struggling lenders, the newspaper wrote on Saturday.

“Of course Chancellor Merkel doesn’t want to give Deutsche Bank any state aid,” Frankfurter Allgemeine’s op-ed reads. “She cannot afford it from the point of view of foreign policy because Berlin is taking a hard line in the Italian bank rescue.”

Allocating public money to a private bank would add up to Germans’ discontent with Angela Merkel’s policies tackle the refugee crisis, Sueddeutsche Zeitung reported. In the run up to 2017 federal elections, the ais would become a major blow for Merkel’s Christian Democratic Union (CDU) party, which has been losing supporters to anti-immigrant Alternative for Germany (AfD) party. At the latest statewide election AfD has reached a threshold 16 percent of votes, for the first time ever.

“Domestic political considerations make it unlikely that Berlin would play this joker. Even more unlikely is that the European Commission would agree. The political risk would be simply too high,” Sueddeutsche wrote.

Meanwhile, Deutsche Bank’s Chief Executive John Cryan issued a letter to calm down the institution’s employees, saying the bank is capable of withstanding the crisis.

“Deutsche Bank has to win back ground here because as exaggerated as the reports of an existential danger to the bank may have been, just as obvious are its continuing difficulties.”

So far, Deutsche Bank has lost over 50 percent in its share prices this year and was called by the International Monetary Fund (IMF) the riskiest bank among those that may trigger the collapse of the entire banking system.

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