Merkel Fate Tied to Deutsche Bank Fortunes, Left Party Head Says

  • Hands-off stance may not be tenable, Left’s Wagenknecht says
  • Scenario seen as career-ending ‘disaster’ for German leader

Gallo: FX Investors Don’t See Deutsche Bank Systemic Risk

Any taxpayer-funded solution for Deutsche Bank AG’s troubles would be Chancellor Angela Merkel’s downfall, according to the leader of Germany’s biggest opposition party.

Sahra Wagenknecht, the co-leader of the anti-capitalist Left party in Germany’s lower house of parliament, said a bank rescue in the year ahead of national elections in September 2017, in addition to the chancellor’s beleaguered migration policy, would be the end of Merkel’s political career.

Sahra Wagenknecht

Photographer: Sean Gallup/Getty Images

“If she now has to squander taxpayer money again to rescue a failed bank, then she shouldn’t bother to run again,” Wagenknecht said an interview in her Bundestag office. “It would be a total disaster.”

The comments add to the debate in Berlin about Deutsche Bank’s future as Germany’s biggest lender faces flagging profit and a fine of as much as $14 billion by U.S. authorities for mortgage-backed security deals. Merkel’s government and Deutsche Bank are pushing back against market speculation that the bank may need state aid to secure its financial health.

Merkel said Tuesday she wants all German companies, including Deutsche Bank, to do well, “also if they’re having temporary difficulties.” An ally in her coalition went further, saying that Deutsche Bank wouldn’t receive a classic bank rescue because of tightened European Union rules.

“There won’t be that kind of state aid now that the banking union has been agreed,” Social Democratic parliamentary leader Thomas Oppermann told reporters. “First and foremost, it’s up to the bank to solve its problems.”

Last Resort

Wagenknecht, 47, said that hands-off stance by Merkel’s Christian Democrat-led bloc and her Social Democratic coalition partner will be tested if Deutsche Bank runs into a capital crunch.

“That the coalition would really allow the bankruptcy, the dissolution and the liquidation of Deutsche Bank, I could hardly imagine that,” Wagenknecht said.

A two-term lawmaker and former member of the European Parliament, Wagenknecht is a prominent figure in Germany’s biggest parliamentary opposition party. She took the lead in attacking Merkel’s austerity policies during the euro-area crisis and regularly criticizes what the Left views as a too-cozy relationship between the finance industry and the government.

The Left, with 64 seats, together with the Greens at 63, make up the opposition in the lower house to Merkel’s coalition, which controls four-fifths of the Bundestag’s seats.

Once the leader of the the Communist Platform wing of the Left party, which was formed in 2007 by dissident Social Democrats and the successor of the communist party that ran former East Germany for four decades, Wagenknecht said Deutsche Bank is too big to fail and should be dismantled rather than rescued.

Any rescue would more likely entail indirect state funding rather than a full bailout to make it politically palatable, she said. One option would be to engineer a merger between Deutsche Bank and Commerzbank AG, which is 15 percent owned by the federal government since a crisis-era bailout. State aid would then come through a side door in the form of a capital increase, Wagenknecht said.

Dismantle It

Although a swath of her party advocates nationalizing banks, the Left leader said that policy shouldn’t apply to Deutsche Bank if it ends up in distress. When the German government took over property lender Hypo Real Estate in 2009 during the financial crisis, taxpayers wound up with the losses, she said.

Deutsche Bank has excelled in areas “that are completely useless to the broader economy” and Germany doesn’t need a national banking champion, according to Wagenknecht. The bank should be “dismembered, shrunk and reduced to solid credit business,” she said.

“Humanity won’t miss a gambling joint if it no longer exists,” Wagenknecht said.

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