'We should nationalise German banks' Warning Deutsche Bank teetering on edge of CRISIS
Martin Hellwig said stress tests carried out by the European Central Bank revealed the Deutsche Bank would be left in a precarious position in the event of another financial crisis.
While it would probably not go bust in a fresh downturn - he predicted the bank which is crucial to the German economy would face serious equity problems.
He said: "Putting it short: for a long and serious crisis there simply wouldn't be enough money."
The Berlin government has previously only bailed out the banks under extreme circumstances but Mr Hellwig, director of the Max Planck Institute for Research on Collective Goods, backed the idea of using taxpayers' money to fund public sector investment.
He said: "Turning banks into community property through public funds is not only possible but also necessary.
"If a bank is no longer able to help itself, the federal government should take on shares and exercise the related control functions."
He continued: "In Sweden the state stepped in in 1992, filleted out unprofitable divisions and left stable companies.
"It was a successful, temporary nationalisation. The goal had always been to enable a clean-up and to then get out again."
He said nationalisation may not have been part of Germany's plan since the last financial crisis but unusual scenarios sometimes require desperate measures and would be appropriate for banks as such a large part of the economy is entirely dependent on them.
Mr Hellwig said: "I assume that this tool will be used when it comes to an institution where there are fear that a settlement procedure would bring significant system damage."
Banks that are "too big to fail" could be saved with tax-euros and the investment might even pay a return for the state.
Another possible effect of state intervention would be the inevitable modernisation that would improve the bank which has seen its retail divisions become barely profitable.
Mr Helwigg said: "From the outside, one gets the impression that in the last 20 years the investment bankers controlled the bank and sucked it dry. Nationalisation in an emergency could be a step towards more rationality in the banking world."
The comments come after last month struggling Deutsche Bank closed down almost 200 branches and is set to cut almost 3,000 jobs.
Financial expert Max Keiser recently claimed Germany's largest bank is "technically insolvent" and runs a "ponzi scheme".
He said: "The bank needs to go out of business, because they are not solvent. But politicians, including Schaeuble, allow for financial engineering products to come onto the market that mask insolvency.
"It's dead, it's insolvent, the bank is dead... This is a dead bank walking."
( Source )