DEUTSCHE BANK chief Josef Ackermann has backtracked on his claim that that markets cannot survive the current financial crisis without state intervention.
His remark, that he "no longer believes in the self-healing power of the market", comes as the credit crunch forced another €450 million state bailout for Germany's troubled Industriebank (IKB).
Trading in the bank's shares was suspended temporarily yesterday after news of the latest bailout, raising to €9 billion the total value of state aid to the bank since last July.
Shares fell to an 11-year low of €4.53 after executives admitted a "high probability of default" on a further €630 million in risky loans.
"IKB will not post any or very low profits in the coming financial years," said the bank in a statement, predicting a post-tax loss of €800 million for this year.
The IKB pitches itself at small- and medium-sized companies. As the first German bank hit by the subprime crisis, it has only survived on transfusions of public money.
The federal finance ministry in Berlin, which owns 43.4 per cent of IKB through the KfW state investment bank, has continued to pump money into the bank for fear of greater consequences if the bank collapsed with debts estimated at €24 billion.
After news of the latest cash injection emerged yesterday, the first calls came to let the bank fold.
"The bank is dead; it is not worth a dime," one Frankfurt trader told a German news agency.
"The bank can no longer be saved," said the Financial Times Deutschland, drawing parallels with the sale of Bear Stearns to JPMorgan. The central problem with the IKB, the newspaper noted, is that no one is really sure how much it and its subprime-tainted assets are worth. Berlin's hopes of raising €800 million from the sale of its stake in the bank were, it said, "nothing but air".
"The cleanest way would be to let the bank move into insolvency and compensate creditors in pecking order."
Meanwhile, Mr Ackermann's apparent call for greater state intervention in the financial crisis has stirred up a new round of debate in Germany about using public money to save private banks.
Bundesbank president Axel Weber said it was "banks who needed to act first".
Germany's federal economics minister Michael Glos was more outspoken.
"From the same management floors that demand less state, we suddenly hear calls for more state," he said. "That won't do anything to calm the current situation."
Thomas Straubhaar, one of the economic "wise men" advisers to the federal government, said: "Profits are to be privatised and losses nationalised - I consider that screamingly unjust."
Mr Ackermann rowed back yesterday, claiming his original statement from Tuesday was limited to the US property market.
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