Italy’s Prime Minister Renzi Tells Bundesbank Chief To Fix Deutsche Bank
Sept. 20, 2016 (EIRNS)—Italian Prime Minister Matteo Renzi slammed Germany’s Bundesbank chief Jens Weidmann for telling Italy to cut its public debt, saying that instead Weidmann should fix the German banks, especially Deutsche Bank. Renzi told reporters in New York that Weidmann
"has an ungrateful job. I express my full solidarity, because he must face the big issue of German banks: we wish him to be successful. We give him a lovely hug of good work,"
since "for a few dozens billion [in] non-performing loans in Italian banks, there are hundreds of billions of derivatives in German banks."
Zero Hedge’s Tyler Durden seconded Renzi, writing yesterday that the potential $14 billion fine against Deutsche Bank, or the fact that it continues to be under-capitalized, or its potential failure to securitize $5.5 billion of corporate loans to offload risk, are the least of its problems. The "elephant in the room," of course, is its huge derivatives exposure, which, as Zero Hedge noted it had already revealed a few years ago, amounted to "$75 trillion at the time in gross notional derivatives which as we said then was about 20 times bigger than Germany’s GDP, and 5 times bigger than the entire economic output of the Eurozone."
Zero Hedge says it was ignored at the time, but now
"Italy’s Prime Minister Matteo Renzi, ’went there’ and slammed Deutsche Bank as the true ’derivative problem’ facing Europe.... Renzi once again broke with the fine European tradition of ignoring the massively overleveraged elephant in the room, and said on Monday that Germany’s central bank chief Jens Weidmann should concentrate on fixing the problems of his own country’s banks ... that Weidmann needed to solve the problem of German banks which had ’hundreds and hundreds and hundreds of billions of euros of derivatives’ on their books.... And while Renzi may be wrong about almost everything else, he is right about Deutsche Bank’s ’hundreds and hundreds and hundreds of billions of euros of derivatives.’"
Durden puts the figure of Deutsche Bank’s derivatives pile at €42 trillion "to be precise." He concludes,
"what happens when, not if, another crisis flares up and one or more counter-parties to the bank’s trillions in various derivatives suddenly is unable to post margin, as its obligation becomes a pre-petition claim, sticking DB with the entire gross notional derivative amount and forcing the German giant to foot the gross, not net."
He adds that in 2013 the "elephant" might have once again been ignored, but 2016 is not 2013. Now Europe is splintering and "more disenchanted political leaders (because the ’enemy of my enemy is my friend’) will join Renzi in admitting that Europe’s emperor—Germany—and its mega-bank, is not only naked but one needs scientific notation to express just how big its financial problems truly are."