The collapse of banks is breathtaking, the rescue operations on Sunday evening more exciting than any crime scene – no wonder that on social media some would like to see more of it and the gloomiest forecasts get the loudest applause there. Bankers actually deserve little pity. What is forgotten, however, is that a banking crisis is a deeply threatening matter for an economy. If it were otherwise, the banks could be left to their fate.
However, this is not possible because companies cannot survive for long without functioning banks and financial markets. In the end, the state guarantees and billions in loans from the central banks are about saving the real economy – and thus about prosperity and jobs.
The fear of the chain reaction
Tumbling banks are nothing abstract and cannot be indifferent to the average citizen. The last financial crisis showed this. In 2009, German economic output shrank by 5.6 percent. When shops were closed for weeks in 2020 due to the pandemic, gross domestic product "only" collapsed by a good 4 percent.
In 2009, however, the banks no longer trusted each other and fell into a state of shock. Companies found it difficult to obtain loans. Instead of investing in machinery and personnel, they scaled back their businesses. Stimulus packages had to get the economy going again.
This chain reaction is also the threatening scenario this time. Fortunately, it is not yet so far and it is not certain that it will come to that. However, the German economy, which is already stagnating and has little growth potential, would be ill-equipped for a banking crisis.
As a worker and also as a citizen, you have to hope that the crash will not happen. After all, employees who lose their jobs in a deep recession earn even less decades later. Moreover, financial crises have proven to be a catalyst for populism in the past. Nobody can want that either. So it's annoying when central banks and states now have to take billions in bailouts again – but it can be worth it.