(12 July 2016 – Europe) Deutsche Bank’s chief economist has sent a warning alarm on the potential impact of failing banks in Europe.
Speaking to a German newspaper, the bank’s chief economist, David Folkerts-Landau said “Europe is extremely sick and must start dealing with its problems extremely quickly, or else there may be an accident.”
“I’m no doomsday prophet, I am a realist,” he added.
With Italian banks burdened by €360 billion (A$525 billion) of bad loans, the government has been negotiating with domestic and European regulators on ways to reinforce lenders following a further downturn caused by the Brexit vote.
Societe Generale chairman, Lorenzo Bini Smaghi said last week that Italy’s banking crisis could spread to the rest of Europe. He said the rules limiting state aid to lenders should be reconsidered to prevent greater upheaval.
However, Folkerts-Landau said he did not expect a repeat of the 2008 Global Financial Crisis.
“I do not expect a second financial crisis like in 2008,” he told Welt am Sonntag.
“The banks are much more stable today and have more equity. What we face this time is a slow, long downward spiral.”