Deutsche Bank’s shares plunged to record lows this week, sparking talk of a government bailout to avert a new financial crash. The turmoil surrounding Germany’s biggest bank demonstrates that all of the contradictions of the global financial system that led to the meltdown of 2008 are once again erupting. Now, however, these contradictions are fuelling and intersecting with economic and political tensions between the major powers. These geo-political conflicts are, in turn, intensifying the financial crisis.
The financial position of Deutsche Bank has been of concern for a number of years, with the International Monetary Fund saying last June that it appeared to be “the most important net contributor to systemic risks in the global financial system.” But the immediate cause of the present crisis was political.
After a protracted investigation, the US Department of Justice moved last month to impose a $14 billion penalty on Deutsche Bank for fraudulent practices in relation to the US sub-prime mortgage market in the lead-up to the 2008 crisis. Both the substance of this decision and the circumstances surrounding it indicate that it was a calculated move to hit Germany’s only major international bank.