By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.
On Friday before Christmas when nobody was paying attention, when people were elbowing their way through department stores or heading out for vacation, the European Commission issued its report on bank bailouts in the European Union—a dry document with mind-boggling numbers that left out the most important fact.
The misnamed “2012 State Aid Scoreboard“ provided a sobering number—misnamed because it covered the period from October 2008 through December 2011, and not 2012. It had taken the Commission bureaucracy a year to add up all the numbers, and there were a lot of them to add up. Turns out, the amount that the governments of all 27 EU states had handed to their banks to prop them up or bail them out amounted to €1.616 trillion ($2.1 trillion).
It does not include the bank bailouts of 2012, such as Spain, whose banks are getting their first installment of €39 billion, or Greece [The Price Of “Collective Trauma”: Greece At The Brink of Civil War], or tiny Cyprus whose banks alone require at least €10 billion [The Bailout Of Russian “Black Money” In Cyprus]. Nor does it include any of the ECB’s bailout operations.
Nevertheless, €1.616 trillion is a big number: 13% of European Union GDP. Of that, €1.174 trillion was for “liquidity support,” and €442 billion was for “bank solvency” support, such as recapitalizations and dumping “impaired assets.”
The usual suspects? Um….
In third position, Germany, whose banks received 16% of the total.
In second position, Ireland, whose banks also got 16% of the total. Time and again, we can only shake our heads at the act of insanity committed by the Irish government at the time when it decided to condemn its citizens and taxpayers, current and future, to bail out and make whole the investors in Irish banks—a decision that bankrupted the entire country though it had had its fiscal house in order, until then.
And in first position, drumroll…. the UK, whose rotten banks, now coddled and protected in the City, received 19% of the total.
The Scorecard is short and dry. Nowhere does it say that the citizens and taxpayers of these countries paid not for the bailout of the banks, but for the bailout of their investors, including stockholders, bondholders, counter parties, and other investors and speculators. Guaranteeing deposit or transaction accounts is one thing. But bailing out investors and speculators who’d taken risks and had been compensated for them through yield or the lure of capital gains is quite another.
Socializing the losses and risks that certain privileged investors have incurred—and then allowing them to profit from the bailouts—is of course the purpose of all bailouts. It’s not the bank per se that is important, but its investors. A topic that the bailout oligarchy wraps in silence.
Eurozone banks cause an additional wrinkle: a big bank bailout can take down the entire country, as we have seen, because it cannot print the bailout money itself. So, to keep countries from going bankrupt, the bailout oligarchy shanghaied taxpayers in other countries—even in the US through the IMF. And the bailout of bank investors became transnational.
This is the spirit of further Eurozone and EU integration, advanced by the fiscal union pact, the banking union, and other measures. They’re designed to facilitate these transfers and investor bailouts, to bake them into the system, and make them part of the ordinary procedures buried in a flood of boring press releases. At some point, the people are no longer able to care.
Integration would make it easier to centralize the bailouts on the ECB—and it can print money! Regardless of what the treaties say. But Bundesbank President Jens Weidmann wasn’t enthusiastic. He didn’t “see the big leap into the fiscal union,” he told the Wirtschafts Woche, because it would require the surrender of certain aspects of national sovereignty, for which there was little political will and support from the population.
And he resisted the idea that politically unsolved problems, such as budget deficits, would be shuffled to the ECB. “As guardian of the currency, we must make clear that we’re committed exclusively to our primary goal: monetary stability,” he said. “We’re not the clean-up crew for political failure.”
France’s ability to attract massive amounts of foreign investment has been called a paradox. Because it shouldn’t be able to. Investors should be scared off by labor laws, tax rates, and the threats of nationalizations. Turns out, for multinational corporations, France is a tax haven. But in the era of austerity, it has reached the boiling point. Read…. The French Revolt Against Corporate Welfare Programs For Multinationals