ECB describes in detail how it exploits the poor

The Governing Council of the European Central Bank (ECB’s photographic library). Seemingly this room isn’t good enough for those bankers, so they built a new one much more luxurious.

The European Central Bank during the last two years made profits of €2.11 billion, by exploiting the misery of the five Eurozone countries in financial distress. Of that money, €1.2bn came only from Greek sovereign bonds, that is from the Greek taxpayer and there aren’t many of them. The information is supplied by the ECB itself. Yesterday ECB’s Governing Council decided to publish the central bank’s holdings of sovereign debt paper, acquired under the Securities Markets Programme (SMP) until September 2012. It is bonds issued by Greece, Italy, Spain, Portugal and Ireland of a nominal value of €218bn, being bought by the ECB at discount and meant to be “held to maturity”. We will see how weird this arrangement is.

Save them with their own money

The operation was conceived by Eurozone’s central bank to support the above mentioned counties. This was to be done through ECB purchases of their bonds in the secondary markets, aimed at holding down market yields and indirectly helping them borrow at lower interest rates. This operation ended in September 2012 and left the ECB with more than €2bn in profits out of which, the central bank is financing its new glorious, monument like new building in Frankfort, at a cost so far of more than €500 million.

Profits made at the expenses of unemployed Greeks, Italians, Spaniards, Portuguese and Irish also permitted to ECB to spent €219 million for its staff (2011: €216 million). On top of that the relevant press release reveals that, “Other administrative expenses, comprising rental of premises, professional fees and other goods and services, amounted to €242 million in 2012 (2011: €226 million)”.

It’s very difficult to assess if the overall operational cost of ECB is large or low. It can be noted however that it has created another layer of extremely well-paid bureaucracy, added on top of the existing seventeen central banks’ bureaucrats in Eurozone’s member states. Now a 7% increase of the “other administrative expenses”,  at a time when the ECB aggressively demands that national government budgets must be severely cut, sounds like a provocation for the average man in the street.

ECB above the people

Coming back to the ECB’s profits paid by the five Eurozone countries in financial distress, there is a vague obligation that the national central banks which are to receive those funds should return them to their rightful owners in Athens, Rome, Madrid, Lisbon and Dublin. It’s out of question though that this money will ever be spent for those citizens. Only from Greece however, the extra income helped the central bank increase its profits by 30%.

Eurozone’s central bank now holds sovereign debt paper issued by those five countries of a total value of €218bn. The largest national debt package held in the portfolio of ECB has been issued by the Italian exchequer and has a nominal value of €102.8nb, followed by Spanish bonds of €44.3bn, Greek titles of €33.9bn, Portuguese sovereign debt paper of €22.8bn and Irish bonds of €14.2bn.

The ECB has classified those bonds as to be “held-to-maturity”. It means that the central bank despite having bought them at discounted prices in the secondary markets paying a fraction of their nominal value now demands that the bonds are redeemed on maturity by the issuing countries at full face value. This has already happened with a €3.5bn Greek bond which matured last December. In this way the ECB realises huge capital gains behaving like the worst money shark. The largest part of ECB’s incomes comes from interest on those bonds, which are ultimately paid by the embattled Greek unemployed youth. If this is not usurpation, then words have lost their meaning.

The unspeakable ECB’s behaviour towards entire countries and Peoples continued last year with the erection of its new building of pharaonic dimensions and conception. Only last year’s works cost €191 million, bringing the total so far at €530 million. And all that in a period of crisis for which ECB keeps pressing governments and citizens to pay the cost. And all that despite the fact that ECB’s governors know pretty well that it was not the working people who profited from the real estate and the sovereign debt bubbles, but the bankers.

Adam Smith, in his great book “The Wealth of Nations” was quite right in suggesting that apart the tough rules and severe restrictions bankers should be imposed also to moral and ethical examinations. Creating wealth just by printing and trading money is not any more a temptation for bankers. They consider it by now as their right. Seemingly they aim at something much more terminal. What about leading our brave new world, into modern time slavery, with people working to pay for the banks’ profits and recapitalisation? Isn’t it right Mr Draghi?