“We won't be able to avoid setting up a bigger program to recapitalize banks” David Folkerts-Landau, Deutsche Bank’s chief economist told Die Welt in an interview. “European banks can be recapitalized with 150 billion euros” he added.
 
“We are witnessing one crisis after another and I can, by no stretch of the imagination, make out growth prospects anywhere” Folkerts-Landau pointed out. He said the Italian banks hold 350 billion euros in bad loans and debt ratios are on the rise, which means special attention has to be paid.
 
“Likely, this will only be the lower limit” he said.
 
Deutsche Bank suffered some bad news itself. In a recent report assessing the sustainability of the global financial system, the International Monetary Fund described the German bank as system risk. The price of Deutsche Bank shares slumped last week to an all-time closing low, losing a staggering 49% in value since the beginning of the year. Contacted by AFP, bank officials did not wish to comment on the development.
 
European banks were threatened by a slow, long-term downward spiral and faced with two trillion euros in non-performing loans, Folkerts-Landau said, adding that the European Central Bank's negative deposit rates and low share prices made it hard for banks to acquire capital on their own.
 
New EU banking guidelines allowed for a degree of flexibility and states are allowed to bail out banks for a limited time under specific circumstances. Initially, however, creditors are liable for 8% of the payment obligations before the state can intervene.