Athens, July 13, 2015/ Independent Balkan News Agency
By Michalis Yianneskis, tvxs.gr
Wolfgang Schäuble and the German leadership of the eurozone are good reasons to worry and maintain an uncompromising stance in the negotiations with Greece. The repayment of Greek debt, however, which amounts to EUR 317 billion is not among the most important ones. The Greek debt is insignificant in comparison to the financial dynamite under the German (and other) banks, which in recent months shows daily signs of ignition.
Deutsche Bank alone, the largest bank in Germany, is significantly exposed, holding dubious financial products known as “derivatives”, worth EUR 67 trillion. This amount is similar to the GDP of the entire world and 20 times greater than the GDP of Germany. Any comparison with the bank Lehman Brothers in 2008 would not be at all irrelevant. It’s only that when the Lehman Brothers went bankrupt, it was holding derivatives worth just EUR 31.5 trillion. The crisis of 2008 confirmed the concise definition of derivatives that had been proposed by the American tycoon Warren Buffet: “financial weapons of mass destruction”.
2008 might belong to the past, but recent developments are particularly bleak for Deutsche Bank. The competent authorities of the US and Britain imposed on the bank in April a record fine (which, together with a previous fine, amount to EUR 2.2 billion) for fraudulent interbank rates. In early June suddenly resigned its two co-CEO. One of these two, and four other former bank executives had already been prosecuted by the German judicial authorities for false statements and misleading statements. A few days later, prosecutors raided the bank’s offices in Frankfurt to collect customer data.
At the same time, financial products are becoming more precarious with every passing day. Immediately after the announcement of the failure of the negotiations of the “institutions” with Greece on June 12, the risk of Eurozone bonds recorded a steep rise. The German economic outlook index ZEW fell on June 16 for the third consecutive month, and has fallen 43% in three months.
Admittedly, Germany is no exception. Other countries have similar problems, such as Austria, the Netherlands and Finland. But these are minor compared to the size of the risky investments of Deutsche Bank.
In view of the above problems, a possible Greek default should not be of particular concern in the Eurozone, especially when it has been repeatedly announced that the “institutions” have ready potential plans for a possible Grexit. Could it be that the intensive efforts of the German leadership to highlight the crisis of the European periphery economies (Greece, Spain etc.) as the main problem of the Eurozone are simply a smokescreen to cover the inherent instability of the financial system? Because as developments to date have shown, the primary objective of European leaders is the protection of the banks.
When a giant bank must get rid of “toxic” bonds or obtain additional liquidity, it turns to the ECB. Immediately before the PSI, the ECB helped Deutsche Bank, among others, to sell the “toxic” Greek bonds it held at a good price. These bonds are now held by the ECB, which of course is backed by European taxpayers. The Deutsche Bank and the other banks had relatively insignificant losses from PSI, in contrast to the Greek pensioners. And since the banks did not suffer great loses, they did not have to learn a lesson, convinced that the leaders of northwestern Europe will not leave them hanging in a similar situation in the future.
This scenario is approaching with every passing day, and even a small jolt of the bank boat (a Greek default), can have unintended consequences, such as an uncontrolled chain bankruptcy. Because if something goes wrong, the Deutsche Bank, like most banks, is able to cover only a small part of “derivatives” and other toxic products it holds.
Therefore, Mr. Schaeuble, Mrs. Merkel have every reason to be worried, as well as the other “hard” of the Eurozone. Of course, the real reason for their concern and their intransigent attitude cannot be the Greek debt, which corresponds to 0.5% of the derivatives owned by just one German bank, but the insecurity that creates the possibility of the paper tower that is the financial economy collapsing.
For the German leadership, the Greek crisis is a convenient scapegoat to divert attention of the European public the painful reality, while the tough stance of lenders to Greece and the countries of the periphery of Europe notably aim at avoiding two undesirable developments. First, a shaking of the market, which can cause a default or a deletion of part of the Greek debt. Second, a series of concessions to Greece, which will threaten the European neoliberal establishment. But when the bank boat is leaking, the adoption by Greek passengers of the orders issued by the captains cannot by itself keep it floating.
Probably the Greek negotiators know much more than what their interlocutors and “institutions” give them credit for. That is why the latter use an Orwellian tactics to present as “inexperience” the thorough denial of the Greek side to adapt in a flimsy financial framework.