The way in which Goldman Sachs once upon a time helped Greece to massage its debt numbers is a well known story. More generally, the bad behaviour of bankers that led to the great financial crisis is a well worked theme that has launched many books, films and journalistic tirades.

It’s mostly a story about English-speaking bankers. Continental European financiers have only been lightly tarred with the same brush as their Anglo-Saxon counterparts – except in out of the way places like Ireland, where it is widely believed that we were sacrificed by the ECB in order to protect dodgy German and French banks. We have our suspicions, but have never been able to prove them beyond reasonable doubt.

If we are inured to the ways in which banks conducted their business we risk not paying enough attention to the implications of fresh evidence of bad behaviour. Particularly when it comes to those European bankers who, so far at least, have escaped much of the opprobrium heaped on their London and Wall Street cousins. In that regard it is worth paying close attention to a recently opened criminal trial in Milan involving allegations of illegal collusion between Deutsche Bank and Italy’s troubled lender Monte dei Paschi.

Allegedly Deutsche bankers helped the Italian bank to conceal losses. The scheme was quite astonishing: according to Bloomberg Monte dei Paschi had lost €367 million on a single investment and didn’t want to report it in its end-year accounts. The allegations focus on a Deutsche banker who came up with a wheeze that would make the loss disappear, albeit temporarily.

A financial bet was to be made between the two parties that would guarantee an immediate €367 million profit for dei Paschi. Of course, Deutsche wouldn’t agree to be on the losing side of this bet so it had to be appropriately compensated by the Italians – but only over time, not all at once. This allowed the critical year-end financial reports to be flattered by the omission of the loss.

When banks everywhere were concerned about potential deposit runs – queues outside branches – the optics of key reporting dates were critical. That’s one reason why people went to jail in Ireland for trying to massage year-end numbers.

Weakness

The weakness of Italy’s banks is all too apparent today some eight years after the alleged collusion. Deutsche has also had very public problems: a recently agreed penalty of $7.2 billion (€6.7bn) to US authorities surrounding sub-prime mortgage behaviour has added to its considerable woes (and other fines and penalties).

Inevitably one or two commentators have started to wonder about how German banker misdeeds sit alongside German government insistence on fiscal rules and austerity. Bloomberg writers Vernon Silver and Elisa Martinuzzi have even speculated that if Deutsche were to ever need a government bailout the results could be catastrophic, threatening the existence of the euro itself.

Of course, the euro’s premature obituary has been written many times. However, most of the time the source of the fatal injury has been thought likely to come from government debt. The new idea is that the weakness of German banks poses systemic threats to the euro itself.

Given the strength of the German economy and every Merkel/Schäuble lecture about financial prudence there are lots of ironies to be pondered upon. And it should be acknowledged that these are not widespread fears. Yet big financial problems always have small and unexpected beginnings.

We might be tempted to think that after surviving the worst of the financial crisis it would take something particularly catastrophic to prove existential for the euro. A potential government bailout for one or more German banks may not seem such a big deal to us given our own recent financial history. But stranger things have happened.

Forthcoming elections

The more “conventional” threat to the euro comes from a number of sources: forthcoming elections in France, the Netherlands and Germany. In particular, a Marine Le Pen victory in France is widely thought likely to be a euro-ending event (if not EU-ending). There are many Brits who think there will not be an EU left for the UK to leave.

Given Brexit and Trump it is a wonder to behold so many people placing so much faith in opinion polls and bookie odds: neither the polls or the gambling experts saw the advent of the Trump-Putin administration in the US or its May-Farage counterpart in the UK.

Additionally, Greece has disappeared from most financial radar screens but the ongoing financial torture of that economy will prompt more headlines sooner or later. Unsustainable economic situations are precisely what they say: massive debt relief – anathema to the Germans, of course – is one day inevitable.

It was once said that the euro is but one recession away from trouble. As a matter of fact, that is still true. We also should add that one bad French election result or one German bank bailout are also existential risks.