Tim Worstall

Under the Hypo deal, majority shareholder Bayern Landesbank has agreed to surrender its 67pc stake for a token €1 and to waive a further €825m in liabilities. The Austrian state will provide up to €450m in fresh capital.

The state-owned BayernLB bought Hypo during an expansionist spree at the height of the bubble in 2007. Its Austrian venture has cost Bavaria €3.8bn.

BayernLB was itself rescued by German authorities in a €10bn bail-out last year. While the bank is in no danger itself, the latest losses will force it to tighten lending to boost capital ratios, risking a further credit squeeze over coming months.

Oh, you mean State owned banks make the same, even worse perhaps, mistakes as non State owned ones?

Back to the drawing board then.