(Bloomberg) – A week after Christian Sewing took office at Deutsche Bank AG in April, the newly appointed Finance Minister, Chancellor Angela Merkel, Olaf Scholz, joined the managing director of Germany's biggest lender. an event in Berlin.
The 15-minute exchange – between canapés and ceremonial speeches in a Prussian palace during the annual reception of the German banking association – marked the beginning of a rapprochement between Merkel's government and the financial giant in crisis. Since then, Sewing and other Deutsche Bank executives have made contact with Finance Ministry officials on average every two weeks, a noticeable change after years of quiet relationships.
The thaw stems from the growing concern of Berlin's power actors that more than 30 billion euros of bailouts of banks in the financial crisis have not been enough to ensure that the lender can deal with new issues. tensions in the event of a slowdown in the economy. Any problem at the bank could have repercussions on the whole economy, given its links with German industry – and provoke a political reaction.
Scholz and Joerg Kukies, a former banker of Goldman Sachs who is his deputy, are increasingly likely to challenge the controversial decision and further strengthen the potential of Deutsche Bank by merging it with its German competitor Commerzbank AG. The aim would be to create a national champion who would serve as the heart of Germany's export economy, a bank that would lend to businesses in the country despite the economic crisis. It would also avoid a government red line: additional taxpayer funding to strengthen the banking sector.
The German Ministry of Finance and Deutsche Bank declined to comment.
Scholz, a Social Democrat, was the Labor Minister when the debt crisis hit and managed the upheavals caused by the financial convulsions. He later became mayor of Hamburg, where he had sought investors for the troubled local lender HSH Nordbank.
Since becoming finance minister and vice-chancellor last March, Scholz – who may be blamed for failing Deutsche Bank's plan – has clearly established that the stabilization of the main German lender to the house was only a first step.
Proponents of the industry merger would generate significant cost savings for a combined entity, including Commerzbank. A merged bank would have a much larger market share in the fragmented German banking market, which would allow it to better support its margins.
But not everyone is on the same page. It would be a gigantic enterprise that would aggravate the big business problem already encountered by Deutsche Bank – and that would still not be enough to solve the problem of lenders to generate healthy profits. With a combined balance sheet of 1.9 trillion euros, the risks are numerous, both economically and politically.
"I am very critical of a national merger," said Danyal Bayaz, finance expert and member of the Greens Parliament – the second largest ruling party after Merkel's bloc in recent polls. "This would strengthen the problem too big to fail, which could eventually fall on the German taxpayer."
Merkel stayed on the sidelines, while closely examining Sewing's restructuring restructuring, a person familiar with his thinking said. Her relations with the bank are tense, especially since the Chancellor was burned by a schnitzel dinner and asparagus that she organized for former Deutsche Bank CEO Josef Ackermann.
The April 2008 event took place as the global financial crisis got under way and gave the impression of being too comfortable with an institution since it was stained by a steady stream of lawsuits and investigations . The company has been fined $ 17 billion over the last decade.
The reputational risk associated with this reputed lender only exacerbates the geopolitical puzzles of the German Chancellor, already harassed by the threats of Donald Trump, a fragmented European Union and 39, an emerging challenge from China.
Although it defended the use of public funds as needed to maintain the cohesion of the euro area 10 years ago, the battlefield is not Athens, Dublin or Madrid, but Frankfurt. The new commitment is in line with an increasingly practical government approach to industrial policy introduced this week to bolster German export defenders against the United States and China.
Presenting the National Strategy for Industry by 2030, the Minister of Economy, Peter Altmaier, a close ally of Merkel, said that Germany would be more active in "maintaining and to develop the enormous prosperity of this country over the past 70 years ".
Altmaier stressed Tuesday that the German economy as a whole benefits from a lender with the reach of Deutsche Bank.
"A country like Germany should play a role in global financial markets," he said.
–With the help of Steven Arons.
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