Deutsche Bank again in the middle of the US-EU economic skirmishes

Deutsche Bank Towers – Headquarters in Frankfurt am Main, Germany. Taking a look into the lobby. (Deutsche Bank Audiovisual Service).

Deutsche Bank Towers – Headquarters in Frankfurt am Main, Germany. Taking a look into the lobby. (Deutsche Bank Audiovisual Service).

The US government is reacting in many ways against the fine in back taxes of €13 billion which the European Commission imposed on Apple. Firstly, Jack Lew, the American Secretary of the Treasury, accused the EU of grabbing tax incomes which belong to the US. On 31st August he said, “What’s not appropriate is for, in the name of state aid, Europe to be rewriting tax law retroactively, reaching into a tax base that properly should be a U.S. tax base, because it’s U.S. income, and doing it in a way that I think ultimately will hurt the business environment because it’s going to create uncertainty in Europe.”

Lew went on to threaten the European Union through a very strong answer to EU Competition Commissioner Margrethe Vestager‘s comments. She said that she is just making sure each of the 28 member states gets equal treatment in the EU. Her EU Commission department is responsible for the huge tax penalty on Apple. According to Reuters, “Jack Lew urged her to reconsider her investigations because they risked creating disturbing precedents”. It seems that the Americans are now realizing those threats.

Deutsche Bank Again

Last Friday, the US Department of Justice asked the American subsidiary of the largest German lender, Deutsche Bank, to pay a colossal fine of $14 billion. Allegedly, the bank was wrongfully implicated in the 2008 breakdown of the US financial markets, which triggered the then world crisis. Of course, this is just the opening bit of the US Department of Justice and Deutsche Bank is expected to come up with a proposal. According to sources, the lender expected a settlement between $2bn to 3bn.

Quite possibly, the size of the opening fine by the US Department of Justice precludes a settlement as low as the Bank expects. In the case of J.P.Morgan and the Bank of America, the Department opened the negotiations with a penalty of $20bn on each one. The final settlement was reached at $13bn for the former and $17bn for the latter bank. This means Deutsche will probably be pressed to go very close to or possibly above a double digit figure.

Can it pay?

In view of all that, the German lender has set aside around $5bn to pay for possible litigations. Apparently, the US Department of Justice is not the only case that Deutsche has problems with. Simple arithmetic tells us then that the bank will find itself in a very difficult situation, if the Americans continue pressing hard over the size of the fine. Under this light, it will be rather clear if the US wants to really engage the EU in a farfetched economic confrontation or not.

At this point, it must be reminded that last year, the French mammoth bank BNP Paribas was forced by the American authorities to pay a fine of $9.5bn. This was about alleged dealings with Iran and Cuba at the time when such transactions were illegal in the US. A few months later, the US started lifting the embargo on Iran and restored diplomatic relations with Cuba.

More EU banks to be fined

In any case, according to US mainstream financial media, Deutsche is not the last European bank being investigated and surely to be penalized. The list comprises the Royal Bank of Scotland, Union de Banques Suisses (UBS), Credit Swiss and Barclays. If this is so, the largest European banks will be held accountable in the US, on grounds that are yet to be known.

A capital issue

Coming back to Deutsche Bank, this last hideously oversized penalty in the US my cause a lot of pain not only to this bank, but to the entire EU. For months now this German lender has been targeted by the American authorities with leaks to the press ‘revealing’ the weak points of the bank, mainly regarding capitalization. The worst blow came from the Washington based International Monetary Fund, which called Deutsche the biggest risk in the global financial system.

In this way, the Americans have blocked the ability of the bank to increase its capital in the market. It seems the situation is rather desperate, to the extent that some weeks ago, Deutsche’s chief economist, David Folkerts-Landau, said that the Eurozone banks need €150bn in total from taxpayers to adequately recapitalize. What he must have in mind, without mentioning it, is that a good part of this huge amount has to be directed to the coffers of his employer.

Eurozone banks need more

It’s a fact then that the euro area banks are very poorly, if not dangerously inadequately capitalized. On top of that, it’s rather impossible to mobilize enough investors in the open market, to risk their money with them. Obviously, the Americans are currently trying, if not take full advantage of the difficulties of the European banks, at least to exploit this problem for their own interests. In this context comes the long studied Brussels initiative to corner some more US giants like Google, Amazon and McDonald’s on accounts ranging from tax avoidance to exploitation of dominant market position.

Undoubtedly, the US-EU confrontation has just started and it is not clear where it will end up. The determinant of that will be the progress of the much advertised trade deal between the two sides, the, by now infamous, Transatlantic Trade and Investment Partnership (TTIP). If the Americans sense that the deal is going to die, they will be a lot more aggressive than currently. This is an indirect proof that the TTIP will be to the detriment of Europeans and is to help only the multinationals, of which he US has the lion’s share.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Evidence shows ‘brutal’ killing of Saudi journalist ‘planned and perpetrated’ by State officials: UN independent expert

We must learn and change after Haiti sexual abuse scandal -Oxfam chief

Medical training without borders: what’s still missing?

A few, or rather two, trade and economic alliances may rule our brave new world

Statement by Executive Vice-President Margrethe Vestager on State aid measures to address the economic impact of COVID-19

Project Manager – 2024

How civil society must adapt to survive its greatest challenges

Mergers: Commission opens in-depth investigation into proposed acquisition of DSME by HHIH

Carbon neutrality and funds for EU programmes are EP priorities for EU summit

Facts, not fear, will stop COVID-19 – so how should we talk about it?

FROM THE FIELD: ‘Harvested’ rainwater saves Tanzanian students from stomach ulcers, typhoid

More accessible products and services for disabled and elderly people

Fair and Simple Taxation: Commission proposes new package of measures to contribute to Europe’s recovery and growth

“The markets have moved on renewables, policy makers must keep up”, A Sting Exclusive by Erik Solheim, Head of UN Environment

These countries have the most powerful passports

IMF asks Europe to decide on bank resolutions and the Greek Gordian knot

Health: The neglected aspect of climate change

Syria: WHO appeals for funding to sustain critical health care for millions trapped by conflict

Why the ECB prepares to flood the markets with more and free of charge euro; everybody needs that now

This app uses augmented reality to rewrite ‘herstory’

Will the EU ever tackle the migration crisis despite the lack of political will?

Cybersecurity Act: build trust in digital technologies

Poverty and social exclusion skyrocket with austerity

Eurozone governed by an obscure body and gray procedures

Will the EU reconsider Frontex’s role in light of accusations about violations of migrants’ human rights?

Guterres says UN stands ready to support Brazil’s search and rescue effort in wake of tragic dam collapse

Is there a chance for the West to win the war on terror?

An entrepreneurial point-of view on tackling the migration crisis and the risks of abolishing Schengen

The European Sting @ the European Business Summit 2014 – Where European Business and Politics shape the future

How COVID-19 is throttling vital migration flows

Why businesses are nothing without strong human rights

Does research make sense any more? The dire need for new ways to measure success

In tech-driven 21st century, achieving global development goals requires closing digital gender divide

Wind farms now provide 14% of EU power – these countries are leading the way

European Commission determined to conclude EU-Mercosur trade deal this year despite French concerns

We’ve lost 60% of wildlife in less than 50 years

Mental health and suicide: when the alarm bells are faced with deaf ears

“As long as we work together through thick and thin, more benefits can be delivered to the people of Eurasia”, China’s Premier Li Keqiang highlights from ASEM in Brussels

How youth and technology can drive Africa’s COVID-19 response

Nearly $4 billion needed to protect 41 million children from conflict and disaster

The big five EU telecom operators in dire straights

How transparency can help the global economy to grow

What just happened? 5 themes from the COP24 climate talks in Poland

Myanmar military leaders must face genocide charges – UN report

Helping small businesses fight cybercrime benefits the global ecosystem

WHO coronavirus briefing: Isolation, testing and tracing comprise the “backbone” of response

Everything you need to know about the US government shutdown

These are the world’s least – and most – corrupt countries

Peru should help more young vulnerable people into work

ILO warns of widespread insecurity in the global labour market

Greece will probably stay in the Eurozone but at what cost?

Victims’ Rights: New Strategy to empower victims

This incredibly detailed map of Africa could help aid and development

In Mozambique, it’s ‘a matter of the heart’ says Guterres, lauding the cyclone-struck nation’s ‘undeniable moral authority’

Service and Sacrifice: For Ghana, UN peacekeeping is a ‘noble opportunity to serve humanity’

Britain’s May won the first round on the Brexit agreement with the EU

More attacks, ‘persisting security challenges’ threaten progress in West Africa, Sahel

Who is to pay for Trump’s trade war against China?

EU and African leaders to jointly tackle the migration crisis across the Mediterranean

Yemen parties underscore ‘strong desire’ for peace, UN Envoy reports

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s