Banks get new capital for free and citizens pay the bill

 

Jürgen Kröger, Representative of the EC in the Troika (EC/IMF/ECB), Luiz Sá Pessoa, acting Head of Representation of the EC in Portugal, Olli Rehn, Vice-President of the EC in charge of Economic and Monetary Affairs and the Euro and Aníbal Cavaco Silva President of Portugal (from left to right). (EC Audiovisual Services).

Jürgen Kröger, Representative of the EC in the Troika (EC/IMF/ECB), Luiz Sá Pessoa, acting Head of Representation of the EC in Portugal, Olli Rehn, Vice-President of the EC in charge of Economic and Monetary Affairs and the Euro and Aníbal Cavaco Silva President of Portugal (from left to right). (EC Audiovisual Services).

Yesterday the European Commission approved “temporarily” the recapitalisation of a Portuguese bank Banif with €1.1 billion. The Commission will take a final decision on the compatibility of the capital injection with EU state aid rules after the assessment of the restructuring measures will be proposed by Portugal. Presumably those restructuring measures will be layoffs from the bank and more taxes and salary cuts for the average Portuguese citizen, to pay for the money granted free of charge to the bank.

Banking immorality

The money, €1.1bn, will be transmitted by the Portuguese government to the bank through a subscription of shares issued by Banif in the amount of €700 million and in hybrid securities in the amount of €400 million. To be noted that the entire country is under the supervision of the EU-ECB-IMF troika. In this context Portugal is forced to apply a draconian austerity programme, cutting down salaries and pensions in order to receive new loans. Evidently recipients of the new financial support are the banks, not the citizens.

The comparison speaks by itself. On the one side the banks receiving billions for nothing and on the other side the people have to cope with drastic cuts on their incomes and pay unreasonably increased taxation. Exactly the same scenario unfolds in Spain, Ireland and of course Greece.

However the money used to recapitalise Portuguese, Greek, Irish and Spanish banks is peanuts compared to what the major European banks in Germany and France have already got from their own governments and the European Central Bank to bail them out from their toxic loans to Greece, Spain, Portugal, Ireland and elsewhere. But it’s not only that.

The widely advertised Eurozone aid of hundreds of billions to those countries is used mainly if not exclusively to repay bad loans granted carelessly by big German and French banks to equally inconsiderate borrowers in Athens, Madrid, Lisbon and Dublin. In reality Germany and France are saving their own banks through those “aid packages” to Greece, Spain, Portugal and Ireland.

Freeing “state aid”

But let’s return to the “temporarily” approved by the Commission state aid to this Portuguese bank Banif. The story thought is rather long and begins in 2008, the year when the great financial melt-down begun. In December of that year the EU Commission issued an urgent announcement facilitating the recapitalisation of banks with taxpayers’ money.

The text however didn’t say this. It commented that this free capital injection…was for the good of the society as a whole… because with this new money the banks would grant loans to the real economy …thus help economic activity to rebound and bla…bla…bla. This is the usual language to make it easier for the public opinion to swallow the pill, of course with the help of the main stream media.

Here below are quoted the most important parts of that announcement entitled, “State aid: Commission adopts guidance on bank recapitalisation in current financial crisis to boost credit flows to real economy”. Here is the first paragraph of the text: “The European Commission has published detailed guidance on how Member States can recapitalise banks in the current financial crisis to ensure adequate levels of lending to the rest of the economy and stabilise financial markets whilst avoiding excessive distortions of competition, in line with EU state aid rules”. Mind you this announcement was issued on 8 December 2008.

Four years have passed since and the Commission still makes “temporarily” concessions to banks. But it’s not only that. According to Commission’s estimates over those years Eurozone banks have received €4.5 trillion in financial support, either as direct capital injections from governments and other public institutions or as liquidity loans from the European Central Bank at almost zero interest rate. What happened with all that money?

European Central Bank’s data reveal that new loans accorded by Eurozone banks were only around €300 billion during the time period between the third quarter of 2008 and 2012. What did the banks do with the rest of the €4.5 trillion they received for free during the same time? The answer is very simple. They did exactly the same things they had been doing in the past and brought us all to the present unbearable situation. They spin other people’s money around in risky placements and if they win they keep the profits, if their bets go sour ask governments and central banks to recapitalise them and replenish their coffers with zero cost liquidity.

Unfortunately nothing has changed in the western financial system and it seems that credit crisis will be a regular phenomenon from now on. The great melt down of 2008 served at nothing and people like the governor of ECB Mario Draghi and his counterpart in the American Fed, Ben Bernanke, have decided to follow the steps of Allan Greenspan, who should have being judged for the great credit crunch of 2007-2008.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

We need to talk about how we define responsibility online – and how we enforce it

Benjamin Franklin was wrong: Amazon can tax evade

Destabilizing Lebanon after burning Syria; plotting putsch at home: King and Crown Prince of Saudi Arabia

Britain in chaos: May stays as Tory leader and PM but none can defuse the Brexit time bomb

These are the 4 most likely scenarios for the future of energy

The 28 EU leaders don’t touch the thorny issues

Where EU air pollution is deadliest

Schengen: MEPs adopt their position on temporary checks at national borders

The Commission sees ‘moderate recovery’ but prospects deteriorate

Brexit effect: Public opinion survey shows that EU is more appreciated than ever

Populist Eurosceptics helped by Trumpists seriously threaten the EU edifice

Parliament proposes policy toolbox to curb air pollution

Gender equality within junior enterprises: the effect of President’s gender

Business is stepping up its fight against climate change. This is how

European Court rules that ECB’s OMT program of 2012 is OK; not a word from Germany about returning the Greek 2010 courtesy

EU-U.S. Privacy Shield: Second review shows improvements but a permanent Ombudsperson should be nominated by 28 February 2019

Amid strong outlook for U.S. economy, risks abound

UN emergency relief fund has ‘never been more critical’: Guterres

Venezuela: UN human rights office calls for ‘maximum restraint’ by authorities in face of new demonstrations

YOUTH RIGHTS AT RISK FROM RISE OF EXTREME-RIGHT AND POPULISTS IN THE EUROPEAN PARLIAMENT

Eliminating waste at scale – eight opportunities for blockchain

Central Mali: Top UN genocide prevention official sounds alarm over recent ethnically-targeted killings

Japanese law professor elected new judge at the International Court of Justice

Trade surplus up production down in Eurozone

EU prepares a banking union amidst financial ruins

EU’s core members are eyeing larger parts of arms trade and of world map

The European Commission cuts roaming charges. But “it’s not enough”…

EP Brexit Steering Group calls on the UK to overcome the deadlock

UN chief welcomes new push by El Salvador’s political parties to begin fresh dialogue

Is Eurozone heading towards a long stagnation?

UN chief calls for ‘far greater support’ for Cyclone Idai response

Main results of G20 summit in Buenos Aires, Argentina

How will the NATO-EU competition evolve in the post Brexit era?

Finance for SMEs: Alternative supply mechanisms do exist

‘Time is of the essence’ for refugees on Greek islands – UN agency

UN chief condemns deadly terrorist attack on church in southern Philippines

Guterres expresses ‘grave concern’ following explosion at large political rally for reform-minded Ethiopian Prime Minister

Eurozone: Retail sales and inflation point to recession

MWC 2016 LIVE: Ford trumpets new in-vehicle system, “fundamentally rethinks” transportation

DR Congo: ‘New waves of violence’ likely, UN warns, unless State acts to prevent intercommunal reprisals

New Report Offers Global Outlook on Efforts to Beat Plastic Pollution

Spanish and Polish voters are crying out for an imminent European change while US urge now Germany to change route

The ECB proposes a swift solution for SMEs’ financing

These countries have the most expensive childcare

Parliament cuts own spending to facilitate agreement on EU budget

EU finally to extend sanctions on Russia despite arguments; Greece again in Europe’s spotlight

Court of Auditors: EU spending infested with errors well above the materiality threshold of 2%

AIESEC @ European Business Summit 2014: The Digital Era: A New Business Frontier

UNICEF welcomes Bangladesh statement that Rohingya will not be forced to leave

A machine din

EU Budget 2019 to focus on young people

EU budget: Regional Development and Cohesion Policy beyond 2020

Yanis Varoufakis: “Unsustainable debt turns the creditor into Leviathan; Life under it is becoming nasty, brutish and short”

Finland is a world leader in clean energy. Here’s what’s driving its success

Venezuela’s needs ‘significant and growing’ UN humanitarian chief warns Security Council, as ‘unparalleled’ exodus continues

France is bringing back national service

Junior Enterprises as a solution for Youth Entrepreneurship

EU Copyright Directive: Google News threatens to leave Europe while media startups increasingly worry

3 charts to help you understand the American shale boom

Terror attacks strike people ‘from all walks of life, the UN included’

More Stings?

Comments

  1. This website was… how do I say it? Relevant!! Finally I have found something that helped me.
    Appreciate it!

  2. I really like your blog.. very nice colors & theme.
    Did you create this website yourself or did you hire someone to do it for you?
    Plz answer back as I’m looking to construct my own blog and would like to find out where u got this
    from. thanks a lot

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s