Back where we Started

Pfäffikon SZ, Switzerland – The agreements made within the EU concerning the new European Banking Union are as soft as butter. 2007 and 2008 are still fresh in memory. The one after the other bank had to be saved with tax money. Politicians promised that tax money would never be used again for the rescue of a European bank; nothing seems less true.

Deutsche Bank
Last year, the issue surrounding Deutsche Bank’s credit rating was very lively. The bank would be a ticking time bomb of derivatives, with almost no-one telling you the ins and outs. For now, the news surrounding Deutsche have been pushed into the background. The question is for how long? An even more urgent question is whether Merkel Deutsche Bank had saved if it had come so far.

Italy
The answer is currently given by Italy. On June 23, 2017, the European Central Bank (ECB) pronounced the long-awaited death sentence on Banca Popolare di Vicenza and Veneto Banca. Just two days later, Italy adopted an emergency act. The Italian government allocates up to 17 billion euros for the two small, distressing banks in the north of the country. The banks will be divided, bringing the healthy part to Intesa Sanpaolo for a symbolic amount. The bad part remains behind and is parked in a so-called ‘bad bank.’ This scenario will probably not come as news to you.

2008
The crux of the matter is that bankers and politicians have learned nothing from 2008, and also not comply with the agreements. This is an extremely disappointing development and a bad sign for the near future. After all, the consumer is silently pushed into more debt. The problems that hit the financial markets in 2008 are far from being solved. It is, therefore, not so strange that more and more leading fund managers take into account the reloading of the financial crisis. The earth smolders further, and no one is making any fuss about it. The latter concerns me most.

Apparently, it is about the mindset of European citizens. The citizen has the feeling that it is going well again, but he probably does not realize he lives in an overvalued era. Not to mention the urgent European demographic future. Right now, a hard financial signal would be welcome to raise awareness among citizens, politicians, and bankers that it is serious. Unfortunately, we are back where we started.

It remains for me to wish you a good weekend.


Jan Dwarshuis is CIO at Thirteen Asset Management AG. Dwarshuis writes his columns in a personal capacity. Professionally, he holds positions in major European, American and Russian stock funds. The information in his columns is not intended as professional investment advice or a recommendation to make certain investments. At the time of writing, he has no position in above mentioned shares and has no intention of doing so in the next 72 hours.