Globe Threatening Spanish Crisis: Awarding Corrupt Bankers
And Punishing People
By Farooque Chowdhury
09 June, 2012
Countercurrents.org
Corruption and cronyism ridden banks in Spain are aggravating European debt crisis. Capital interests spread over a wide part of the world are now being threatened by a crisis-shadowed-Spain. Felipe González, former Spanish prime minister, has warned of “a total emergency, the worst crisis we have ever lived through”.
A Spanish failure will create a catastrophic chain reaction putting at peril the single currency and hitting all – Europe, the US and China, and the world will feel a fatal bite. Poorer economies will not be spared by a Spanish collapse. It will be a reassertion of capitals’ globalization of crisis.
After repeated “firm denials” of reports of seeking bailout Spanish banks standing on their knees are at last going to seek bailout. A capitalist morality of “truthfulness” and “honor”! It will be accompanied by austerity measures. The equation now stands: award the corrupt bank capital and punish the people.
According to the IMF, Spain’s knelt down banks need a cash injection of at least $50bn. International finance bosses are going to consider Spanish banks’ survival request – fixing terms and conditions of the way people will be put into bondage to ensure safety of the capital at and will be at stake, on the way surplus value will be appropriated to save bank capital.
Olli Rehn, the EU economic affairs commissioner, expressed his willingness “to consider” giving Madrid an extra year to cut its budget deficit from 8.9% to 3% of GDP. But his condition: Spain would first have to curb the spending of its regional governments and produce “solid” budget plans for the next two years. An EU spokesperson said a few days ago: “We can’t keep up this uncertainty which is weighing on confidence in the markets.”
These are clear indications of tough dictations.
The Spanish bank bosses’ efficiency with corruption, cronyism, inefficiency and plunder are annoying the entire capitalist world. Panic has already gripped the world financial markets. Cyprus crisis is turning starker. A Spanish failure will spread to Italy and Portugal, and that will be beyond capital’s capacity to salvage.
So, Barack Obama is eager for a solution to the European debt crisis. Under the shadow of a poor US economic background he said: Solutions to the European debt crisis “are hard”, and European leaders have to make difficult decisions to get rid of the crisis. European leaders, Obama felt, needed to stabilize Europe’s financial system and pump capital into banks “as soon as possible”. It seemed an effort to put burden of blame on the European leadership. A section of the European leadership is not paying heed to Obama’s suggestion: stimulate growth. There is German interest, seemingly stubborn but, now, turning soft as the German economy has started feeling slowdown pull.
Obama’s unscheduled press conference in the White House exemplified the gravity of the situation, both in Europe, and in the US election politics. The US president admits a deep new recession in Europe would shock the US economy as “Europe is our largest economic trading partner”, he said. Obama assured his European allies of US support. The support is needed.
Before the expression of concern from Washington DC, Spain’s finance minister ran to Germany to seek advice from the powerful German finance minister and the Spanish deputy prime minister jumped over the Atlantic for consultation with the US treasury secretary and the International Monetary Fund boss.
Punishing the Spanish people will follow the bailout approach already adopted in other countries: austerity, “Europe’s economic suicide” as Paul Krugman defined. It will include pension reforms, trimming of civil service, sales tax increase, and other hard measures. A news report by The Observer said: “The government is lowering electricity subsidies by hiking prices. Ticket prices on Madrid’s public transport system have leapt by 50%.” (“Bank bailout makes Spaniards question their future as euro agonies mount”, June 3, 2012.) The Spanish people are already feeling the crushing pressure of bank capital’s gamble.
Global investors are fleeing to “safe havens”, German Bunds and US and UK government bonds, from Spain. In the first quarter of 2012, €97 bn was withdrawn from Spanish banks. In March, it was more than €66 bn, the fastest rate since records began in 1990. In April, the European Central Bank said, it was more than €31 bn.
Already Spain has essentially been shut out of the financial markets. Fitch, the rating agency has already downgraded Spain’s creditworthiness. The agency has also down graded the country’s eight regional governments including Madrid, Catalonia and Andalusia, important regions. The Spanish central bank governor has resigned recently while the European fourth economy’s tax revenues have collapsed. Fiscal revenues have gone down 4.8% over the last year and VAT returns have declined 14.6%. The home construction industry has already collapsed.
High unemployment – 24% of the workforce – is already there in Spain. Misery of debt burdened citizens is going to create a human-crisis.
A news report tells a bit of the human suffering in the present day Spain: “Luz María Reyes [a working lady] had her bags packed and was ready to leave. […S]he waited for the bailiffs to evict her and repossess the family’s modest flat in the working-class Madrid neighbourhood of Aluche. ‘I’ve sent my daughter and grandson to a friend’s house. I don’t want them to see this’, Reyes, 52, said as she waited for a court official and his police escort to ring the doorbell and shatter her dreams of a secure future for her family.” Reyes said: “I put on the television and see that all this money is being given to Bankia, but at the same time the bank is taking away from those in need.” “Bankia was demanding €23.5bn of taxpayers’ money to stave off collapse. That is €1,350 from each working Spaniard. Among other costs that need absorbing by the savings banks that made up Bankia are a €6.2m payoff to one senior executive who helped drive the bank to disaster and €14m to another.” (ibid.)
On the other hand, the banks have their own “story” now coming out to public view.
There were “unqualified board members who admit they were incapable of analysing the banks’ books”, “trips to India, China or Chicago”, “chairmen [of the board] were often unqualified politicians”, “minutes of meetings may have been tampered with”, “One board meeting a year […] held abroad” with wife or partners. (“Spain's savings banks’ culture of greed, cronyism and political meddling”, The Guardian, June 9, 2012)
“Cajas [savings banks] as a whole gave senior management a 50% pay rise over that period, though profits only rose 7%. … Part of … senior management [of a bank] had opted for early retirement as the bank headed towards disaster, with six members, including director-general López Abad, estimated to have left with payoffs jointly totaling more than €10m. Stories of multimillion euro payments are emerging from other cajas. Bankia paid executive Matías Amat €6.2 m for taking early retirement. Bancaja, one of the seven cajas that merged to form Bankia, reportedly owes executive Aurelio Izquierdo €14m. (ibid.)
But banks will survive at the cost of taxpayers, in Spain and in other countries. The bailout will ensure this.
Labor will also be put under pressure by creating a huge reserve army of labor. Austerity measures will ensure it.
The mainstream media is talking about labor unit costs in Spain. It is neither raising the rate of profit real estate speculators made nor the amount of money the bank bosses took back home, millions of dollars each, nor the way they operated banks, the way did they gamble with real estate, the way they constructed a web of housing bubble and lies. The following story tells a part of bank capital’s efficient way of doing business.
“Seven years ago a local savings bank persuaded Reyes … to take out a 100% mortgage to buy the flat for €195,000 (£157,000). The bank has since merged with half a dozen others, all of which had thrown bad money at property speculators, to form a sick giant called Bankia.” (The Observer, op. cit.)
Has not the circle of speculation, gamble, corruption and lies been completed? Bankers know the answer best. It’s bank capital’s business. Whatever the answer is it was, no doubt, market “efficiency” that will make market fundamentalists happy. It was an “efficient” allocation of funds, an “efficient” equilibrium, and an efficient way of punishing labor, and all these by market, a “free, fair, democratic” market.
But the “story of human suffering is unending. Citing Spain’s National Statistics Institute figures Unicef’s The impact of the crisis on children report said: 2.2 million children, about 26%, live in homes that fall below the 2010 poverty threshold. For the first time, children living in situations of deprivation in Spain outnumber the over-65s. The number of children on the poverty line has risen by 10% compared to 2008. Only Bulgaria and Romania exceed this figure within the European Union.
There are other facts of suffering. Spain is now rife with human sufferings. Capital’s contribution! Capital should be happy with its own job.
It’s not a surreal background of bankers’ tale. It’s a real life background dominated by bankers in Spain; it’s a tale of capital and human suffering now threatening capital’s world while capital is hatching plots to put the burden on people, with taxpayers’ money, with austerity.
Farooque Chowdhury from Dhaka contributes on socioeconomic issues.
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