Parallel downfalls of Merkel and Deutsche Bank threaten Germany and Europe

German Chancellor Angela Merkel met the French President Emmanuel Macron in Marseille for political talks, on European issues. All smiles but in different ways. Taken 7/9/2018. Photo: Bundesregierung/Bergmann

Only a few years ago, Germany’s stars of pride and accomplishment were personified and embodied in the unparalleled triumphant stories and achievements of Chancellor Angela Merkel and Deutsche Bank. They both had amazed Europe and the world, with their successes in the politico-economic universe. Until the legislative elections of September 2017, and probably sometime earlier than that, Merkel held Europe’s political helm and firmly had been sailing the European Union in the globe’s high seas.

It was the same for Germany’s largest economic group. At that time, and until the summer of 2016, Deutsche Bank was victorious in all and every financial market. Managed from its headquarters in Frankfurt, New York and London, Deutsche’s investment banking was omnipotent all over the world. Today, both Angela Merkel and, more so, Deutsche Bank are considered by many at home and abroad, more of a liability than an asset for the affluent nation.

Signs of descent

This week, the German financial watchdog, Bafin, appointed an investigator in Deutsche Bank, to inquire about money laundering. The lender is under scrutiny by the authorities for slack anti-money laundering practices. On the same day, Tuesday 25 September, Merkel’s trusted colleague Volker Kauder was voted out of the presidency of the governing party’s Parliamentary group.

Kauder had been leading Christian Democratic Union’s deputies in the Bundestag, all along Merkel’s long years of Chancellorship. It was a Party deputies’ rebellion against their President, probably marking the last act of Merkel’s downfall story. But let’s take the two stories from the beginning.

Money laundering

A few years ago, Deutsche Bank’s fast but risky expansion attracted the wrath of the Americans. This European bank had started doing in the US exactly what the New York mammoth Yankee financial conglomerates were doing, and was rather successful. So, early in July 2016, the American central bank, the Fed, the International Monetary Fund and the largest US rating firm, Moody’s, in a synchronized cannonade, issued grave warnings about the health of the largest German lender.

Of course, Deutsche Bank’s problems had started earlier than that. The lender was exposed to the Greek, Irish and Spanish financial crisis of 2010 and was narrowly saved by the ‘Panzers’.

The German government used ruthless political force aided by the European Central Bank, obliging the three poor countries to pay all of Deutsche’s imprudent credits in full to their sovereign borrower. In the case of the Latin American sovereign bankruptcies of the 1980s, the New York banks had shared the rescue costs with the Latinos. The Germans didn’t accept to do the same with their EU partners.

Chased from New York

After the 2016 Fed-IMF-Moddy’s salvo against Deutsche Bank, the US Department of Justice took the tally and started chasing the German lender, loading it with billions in fines. Soon, Deutsche had to summarily leave the New York investment banking hub and also slash its London headquarters.

Now, the bank has practically dumped all its investment banking activities being haunted by unprecedented clashes on the highest executive level. The bank’s stock is not regarded anymore as an investment. There is talk about Deutsche Bank disappearing altogether through being absorbed by Commerzbank, Germany’s second largest bank.

Merkel’s fall

Merkel’s parallel course is not so dreadful, though. She is still on the helm of the country but a lot of people think about her replacement. The last incident was the failure of her confidant Volker Kauder to retain his position leading the CDU Parliamentarians. At the same time, Merkel’s cooperation with the Social Democrats in the governing ‘Grand Coalition’ is practically dead. In the latest incident, the country’s head spy was molested by a government which couldn’t come up with a decision about his fate.

The Socialists seem to be convinced that their association with Merkel may prove fatal for their electoral future. Already, they appear third in polls, after the extreme right party, Alternative for Germany (AfD). The Chancellor’s CDU despite still leading in polls, also keeps losing ground. In a dangerous but possible perspective, Merkel’s aura loss and slow downfall, may give a chance to AfD to further increase its appeal at that part of voters.

Shifting to the far right

At the same time, the entire political spectrum of Germany may shift to the far right. If CDU and Merkel choose to confront AfD in their ground, they will not only loose more votes, but they will lead their country and Europe to rough waters.

Xenophobia and violence against ‘difference’ was the fuel to Hitler’s Nazis. It’s a pity for a so affluent country to have neglected a good part of its society in economic disadvantage and exclusion, thus leaving it susceptible to AfD’s extremist rhetoric. Real wages haven’t actually increased for years. If nationalism and xenophobia reach the German middle classes, then Europe will have a lethal problem.

So, Merkel and Deutsche Bank, after having helped Germany become what it is today, now constitute grave dangers. They are threats not only for the country but for the entire continent in the dire era of Trump and Putin.