German Financial Crash: Deutsche Bank Plummets As Shares Become ‘Junk Stocks’
By MILLIE COOKE
Since the start of the week, the shares of both Commerzbank and Deutsche Bank, Germany’s top two banks, have fallen by more than 10 percent. German news outlet “Bild” described the shares as having become “junk stocks”. This came after US investor Capital Group sold large stakes in the banks.
Capital Group’s exit followed a similar move by US private equity firm, Cerberus, which sold its sizable shares in Deutsche Bank and Commerzbank in January 2022.
The firm had a 3 percent stake in Deutsche Bank and a 5 percent stake in Commerzbank.
But a statement from Deutsche Bank said it remained “confident”, adding: “Our focused business model and risk-management capabilities have proven their resilience in challenging times.”
Germany is at risk of a financial crash, as Deutsche Bank’s shares have plummeted
A statement from Deutsche Bank said that it remained ‘confident’
Commerzbank echoed this, saying: “The bank’s business model and risk management have proven effective in challenging times.”
The latest shock to the German economy comes amid mounting fears over the European economy.
Eurozone inflation reached record highs in January, with prices rising by a mammoth 5.1 percent.
Eurozone inflation reached record highs in January, with prices rising by a mammoth 5.1 percent
The war in Ukraine has piled pressure on Western economies
Meanwhile, German annual inflation rose to its highest level in more than 40 years last month.
Earlier this year, the German Council of Economic Experts slashed its growth forecast for the country from 4.6 percent to just 1.8 percent.
This comes as the war in Ukraine and the ensuing sanctions placed on Russian businesses and oligarchs has piled pressure on Western economies, with soaring energy costs triggering the increases in inflation.
On Wednesday, Germany’s leading economic institutes warned a full embargo on Russian energy would cause “a sharp recession”.
The economic institutes – the RWI in Essen, the DIW in Berlin, the Ifo in Munich, the IfW in Kiel and Halle’s IWH – confirmed the economy would contract by 2.2 percent in 2023 if Russian energy was cut off.
Germany depends on Russia for about 1/3rd of its total energy consumption.
Stefan Kooths, vice president at the Kiel Institute for the World Economy, warned: “If gas supplies were to be cut off, the German economy would undergo a sharp recession.”
Germany depends on Russia for about 1/3rd of its total energy consumption
This comes amid mounting pressure on the EU to phase out Russian energy.
The European Commission has so far pledged to cut its use of Russian gas by two-thirds by the end of 2022, with the longer-term goal of ending its reliance on Russian energy entirely by 2030.
The EU as a whole imports about 40 percent of its gas from Russia and 27 percent of its oil.