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Report: Deutsche Bank chief economist calls for state aid in Europe

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Report: Deutsche Bank chief economist calls for state aid in Europe

Chief EconomistDavid Folkerts-Landau called for a €150 billion European rescue program toavert another banking crisis, even if such an initiative would fly in the faceof recently introduced, more restrictive rules on state aid, Welt am Sonntag reported July 10.

Folkerts-Landaureportedly told the German newspaper that he is particular concerned aboutItaly's lenders, saying estimates of their needing €40 billion in additionalcapital, as reportedly suggested by Italian Prime Minister Matteo Renzi, werelikely to be "conservative."

Althoughnew rules on state support stipulate that shareholders and private creditorshave to contribute to a lender's rescue before the government is drafted in,Folkerts-Landau reportedly argued that bail-ins are, in fact, not feasible froma political point of view. In Italy's case, this is because many savers wouldbe hit very hard, while bail-ins could also prompt a run on banks elsewhere.

Folkerts-Landauadded that to follow the rules "would cause greater damage than suspendingthem."