I understand it is illegal for the German government to bail out Deutsche Bank per EU rules...?
Known in EU jargon as the Bank Recovery and Resolution Directive, the legislation is the centrepiece of efforts to avoid a repeat of the €1.6tn of taxpayer support to banks during the 2008 financial crisis.
It empowers regulators to intervene quickly when a bank is weak, avoiding the panic that could arise from a messy and prolonged insolvency procedure. The law took effect in 2015, but markets were given an extra year to adjust to the most controversial measure: tougher rules imposing losses on a failing bank’s creditors, which kicked in on January 1.
This stipulates that 8 per cent of a bank’s liabilities must be wiped out before any taxpayer support can be provided, placing unsecured senior bondholders and also large corporate depositors on the hook for forced losses, also known as bail-ins.
https://www.ft.com/content/8ad2ed98-d0a0-11e5-986a-62c79fcbcead
Germany is the lead nation in the EU - they don’t have to obey the ‘rules’. Who is going to stop them? Do you think Merkel is dumb enough to allow the largest bank in Germany to collapse, and in an election year?
They will simply order the European Central Bank, which they also control, to do anything necessary to fix Deutsche Bank. Equity holders may take a bath, but nobody else will be hurt.
If necessary, they could ask Washington to cool it, in return for the EU taking it easy on Google and Facebook.