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.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

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

EU budget: Stepping up the EU’s role as a security and defence provider

Statement by President von der Leyen on recent developments related to Iran and Iraq

The energy industry is changing. Are governments switched on?

Myanmar military leaders must face genocide charges – UN report

The MH17 tragedy to put a tombstone on Ukrainian civil war

Climate change and health: Raising awareness is the key for greener actions

We have a space debris problem. Here’s how to solve it

The US reject EU proposal for prudential financial controls

The EU has to prove it can remain one piece

Will Merkel ever steer the EU migration Titanic and restore her power in Germany?

The EU Commission openly repudiates the austere economic policies

Drones, disinfectant, distancing – Europe’s beaches open up

Unemployment worries spike around the world as coronavirus remains top global concern

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

Post the pandemic: keeping our worlds turning

These rules could save humanity from the threat of rogue AI

Unemployment is down across the world’s largest economies

COVID-19: EU co-finances the delivery of more protective equipment to China

Global leaders and companies pledge to reduce the gender pay gap by 2030

Climate change: new rules agreed to determine which investments are green

The EU’s Response to COVID-19

Dangers of poor quality health care revealed ‘in all countries’: WHO report

Mergers: Commission opens in-depth investigation into joint ventures proposed by Boeing and Embraer

4 things ISPs can do to reduce the impact of cybercrime

Implementation of EU Facility for Refugees in Turkey: EU mobilises €663 million in humanitarian assistance

Palestine refugee crisis ‘expanding’; leaving highest number at risk this century across Gaza

European Commission requests that Italy presents a revised draft budgetary plan for 2019

ECB’s new money bonanza handed out to help the real economy or create new bubbles?

From ‘dead on the inside’ to ‘truly alive’: Survivor of genocide against the Tutsi in Rwanda recounts her story as UN marks 25th anniversary

On Youth Participation: Are we active citizens?

Huge data gaps’ hampering ‘evidence-based’ national migration policies

COP24: A million lives could be saved by 2050 through climate action, UN health agency reveals

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

EU Commission indifferent on Court of Auditors’ recommendations

First-ever global conference of national counter-terrorism chiefs will strengthen cooperation, build ‘resilient’ States, says top UN official

COVID-19 tracing apps: MEPs stress the need to preserve citizens’ privacy

Almost there: Equal healthcare for LGBTQI+

Palestine refugees’ relief chief warns Security Council money to fund Gaza operations will run out in mid-June

We must learn and change after Haiti sexual abuse scandal -Oxfam chief

Online radio and news broadcasts: Parliament and Council reach deal

Health is nothing but the main consequence of climate change

Marco Polo’s Dream

Rural Bangladesh has already embraced renewable energy. Here’s what the rest of the world can learn

Europe plans to send satellites into space to monitor CO2 emissions

US now has most coronavirus cases in the world – Today’s coronavirus updates

UN chief lauds Fijians as ‘natural global leaders’ on climate, environment, hails ‘symbiotic relationship’ with land and sea

The 28 EU leaders care more about fiscal orthodoxy than effectively fighting youth unemployment

Lagarde: Keep feeding the banks cut down wages and food subsidies

Recognizing, protecting and empowering youth rights in Europe and the world

Should Europe be afraid of the developing world?

Most fish consumers support a ban on fishing endangered species, poll finds

New rules allow EU consumers to defend their rights collectively

The Great Reset needs great leaders to help the most vulnerable

A bad marriage can be as unhealthy as smoking and drinking

EU job-search aid worth €9.9 million for 1,858 former Air France workers

From Model T to EV: a short history of motor vehicle manufacturing

African elephants under continued threat of poaching, warns UN-backed report

This Dutch company has devised an innovative way to deal with food waste

Quicker freezing and confiscation of criminal assets in the EU

Euro celebrates its 20th birthday

More Stings?

Advertising

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