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Italy Investigating Deutsche Bank for Its Role in 2011 Italian Debt Crisis

May 6, 2016 (EIRNS)—State attorney Michele Ruggiero in Trani, Italy opened an investigation on the role played by Deutsche Bank in the 2011 Italian debt crisis. Deutsche Bank is accused of having unleashed a run on Italian bonds by selling €7 billion (almost the entirety of its stock) of Italian sovereign bonds, and at the same time purchasing credit default swaps (CDS) against those assets. While Deutsche Bank was telling its investors that Italian bonds were safe, it made those sales over the counter in a very short period of time, between January to June 2011. Thus, the formal allegation is "market manipulation."

Under investigation is the former Deutsche Bank leadership: Josef Ackerman, and the duo Fitschen and Jain. It was reported today that Italian police already searched the Milan office of Deutsche Bank in the last days.

Although the allegation is a financial one, the nature of the investigated crime is political: the artificial crisis of the Italian sovereign debt engineered in 2011 led to the dismissal of the Berlusconi government and its replacement under EU aegis with the unelected cabinet of technocrats led by Mario Monti. The coup was engineered by the famous Trichet-Draghi European Central Bank letter to the Italian government.

According to the prosecutor’s office, Deutsche Bank indicated as "sustainable" the Italian debt in three monthly reports over the period February-March 2011. But at the same time, Deutsche Bank massively sold those assets over the counter, without communications to the market and with a post-hoc explanation which is "false," namely the need to reduce its exposure in Italian debt after the acquisition of Postbank.

In that same period, Deutsche Bank purchased about €1.4 billions of CDS against the Italian risk. Those purchases were communicated neither to the market, nor to the Italian Treasury.

Thus, investigators say, by selling Italian bonds and purchasing CDS, telling the markets at the same time that the Italian debt was sustainable, Deutsche Bank carried out "market-manipulative actions, of informational-operational sort." Such actions are considered to have altered the market price of Italian bonds, both in the first semester 2011 (when the market ignored the bonds sale) and after the publication of Deutsche Bank’s monthly bulletin of June 2011. At that date (June 2011), the market learned about the massive and swift reduction of Deutsche Bank’s exposure to the Italian risk, interpreting it as a "clear signal of the group’s distrust in the endurance of the Italian sovereign debt."

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