Economic war is playing out between Germany and the US…and Germany’s Deutsche Bank is sinking
Tit-for-tat $14 billion fines between the US and Germany is nothing more than economic warfare.
2 October, 2016
Germany is learning the hard way what it means to go up against the United States corporate machine.
After the European “powerhouse” country tried to flex its economic muscle by imposing a $14 billion EU “back tax” fine on Apple, the US DOJ (one week later) coincidently slapped Deutsche Bank with a $14 billion settlement fee for the investigation into the German bank’s trading of mortgage-backed securities during the financial crisis.
Deutsche Bank is now facing extinction as three weeks of volatility in the stock price has sent its shares to all time lows.
German politicians are now waking up to the fact that they are on the receiving end of a US economic attack…a retribution for Germany’s hubris in actually believing they can impose a “back tax” fee on one of America’s most powerful corporation.
Zerohedge reports that German parliament’s economics committee chairman Peter Ramsauer, in an interview with Welt am Sonntag, said the move against Deutsche…
–“has the characteristics of an economic war”, adding that the US had a “long tradition” of using every available opportunity to wage what amounted to trade war “if it benefits their own economy”, and the “extortionate damages claims” being made in the case of Deutsche Bank were an example of that. According to the German politician, the threat to force Deutsche Bank to pay a $14 billion fine over its mortgage-backed securities business before the 2008 global crisis “has the characteristics of an economic war.”“Extortionate damages claims” in the case are an example of that, said Ramsauer.
Another German politician, Merkel ally and MEP Markus Ferber suggested, as we did, that the Deutsche Bank investigation is a “tit for tat response” from the US Department of Justice after Brussels imposed a record €13 billion penalty against Apple’s tax misdoings in Europe. It’s not just Apple however: earlier this year, Germany’s Volkswagen agreed to pay $16.5 billion in the US for cheating on American diesel vehicle air pollution tests between 2008 and 2015. The fines still risk growing by billions and VW needs to recall 85,000 vehicles.
Meanwhile, German Economy Minister Sigmar Gabriel was not too pleased with Deutsche Bank CEO John Cryan, over his recent comments regarding the bank’s downward spiral.
Cryan told employees his bank was suffering from market speculation, after Deutsche stock plunged to an all-time low last week. “I did not know if I should laugh or cry that the bank that made speculation a business model is now saying it is a victim of speculators,” Gabriel said on Sunday.
Zerohedge adds that no help should be expected for Deutsche Bank anytime soon, not from the German state and not from the US DOJ …
Late Friday, media reported that Deutsche and the US regulators were close to a settlement of $5.4 billion, which pushed the stock six percent higher. The report has been largely denied, not only following reports that Cryan is only now set to fly to the US to negotiate the deal in Washington, but because Deutsche Bank has an obligation to confirm the rumor if it were true. Meanwhile, Moody’s said it would be good news for bondholders if the settlement was $3.1 billion. Fines as high as $5.7 billion would erase 2016 profitability, but not fatally damage the German bank.
German parliamentary budget spokesman for the ruling conservatives Eckhardt Rehberg has ruled out state aid for Deutsche, saying its risky business abroad has resulted in billions of euro in penalties. “At the present time I would rule out any capital help. That would not be the right way to go,” said the politician.