Saving banks with your savings

This is the year of the European Banking Union. The European Union designed a surveillance mechanism of big banks and, if need be, their resolution. Banks should be able to fail and to be wound up. The Finance Ministers have agreed, and the European Parliament should approve the plan before the European election. If so, a European Resolution Board will have the competence to put a major bank into liquidation starting on 1 January 2015. In the US banks can be declared bankrupt. Will it be equally possible in Europe? In reality, it is unlikely. The ultimate consequence of the European Banking Union is not bankruptcy but recapitalizing big banks, taking the savings of ordinary citizens as collateral.

In Europe, so-called systemic banks are inextricably interwoven with the financing of public authorities – in particular welfare states - living beyond their means. Since 2011, the European Central Bank (ECB) called upon public authorities and banks to reduce their mutual dependency, but then launched measures that generated precisely the opposite effect. To save the euro and to unclog the financial transmission system the ECB injected 1,1 trillion euro in the European banking sector. Banks were entitled to borrow substantial amounts of money at low interest rates and in return for soft collateral. However, the flow of cheap money did not enhance the granting of credit to companies but instead enabled banks to acquire big amounts of public debts, in particular in Spain, Italy and France. Currently, Spanish banks own 41% of Spanish public debt. ‘We have brought these consequences upon ourselves’, said Jens Weidmann, President of the German Central Bank, openly criticizing official ECB policy.

The Real Madrid ´Bale Out´ - Question to the Commission

 

Since I asked the question in September, it seems that the Commission has finally decided to launch an investigation! The BBC reports "Real Madrid and Barcelona are among seven Spanish clubs to be investigated over alleged illegal state aid".

Here is the link:   http://www.bbc.com/sport/0/football/25410320

 

This is the finalised text of the question I submitted to the Commission:

 

On the first of September 2013, the Spanish Real Madrid Football Club made public its acquisition of Gareth Bale, for a record price of 100 million euro. Real Madrid has built up a considerable amount of debt in recent years. The acquisition of Bale is in large part financed by Caja Madrid, a regional bank which is now part of  Bankia. Recently, Bankia has been bailed out by the ESM for no less than 18 billion euro. So in reality, European funds are being used as a backstop for unsustainable practices in the Spanish football competition.

1. Does the Commission regard these financial arrangements as a distortion of competition between clubs competing on a Europe-wide level?

2. Does the Commission approve of an ESM-backed bank being involved in an extravagant record deal, with the European taxpayer as its ultimate backstop?

 

The seven deadly sins of EU 'top job' candidates

In Brussels, the power struggle for the four top-jobs has begun: President of the European Commission, President of the European Council, High Representative for Foreign Affairs and Secretary-General of NATO. Some candidates are waiting in the corridors, others are shouting from the rooftops. Many candidates are thereby tempted by the seven deadly sins that lead them straight to the abyss:

1. Whoever asks, does not receive. In 1994, the Dutch Prime Minister Lubbers launched his candidacy for the presidency of the European Commission. He knew that the German Chancellor, Helmut Kohl, didn't want him, so he travelled throughout the EU to lobby. As did the Belgian prime minister Guy Verhofstadt in 2004. Neither got the EU job. They pushed too much: the louder the lobbying, the greater the resistance.

2. Hoping for a coalition of small countries. There's no such thing. Lubbers was trying to get smaller countries behind him, but failed completely. His rival was the Belgian prime minister Jean-Luc Dehaene, also from a small country. Kohl supported Dehaene but his candidacy was killed by a British veto. Eventually, the Prime Minister of Luxembourg, Jacques Santer, won the bid. Larger countries can easily tear apart a coalition of small countries.

The European Nightmare

The official dogma in Brussels is: ´Citizens will feel closer to Europe, if European politics is about domestic politics´. This goal has been reached now, but it is not clear whether voters will show their love for Europe at the upcoming elections next year. Perhaps Europe is getting too close. Martin Sommer, a columnist with the Volkskrant, foresees a coup by the federalists in the European Parliament. Unfortunately that is the dream of many MEP's, with their answer to everything being: ´we need more Europe.´ Is Mr Sommer's nightmare justifiable?

It´s too early to predict how the European Parliament will look like next year with 751 members, but some trends in the Member States can give us an indication:

1. The European Christian-Democrats, who won the elections in 2009, will take a big hit as a result of the economic crisis. They became the ruling political family in 2009, but they didn’t see the crisis coming and so were overtaken by events. The Centre-Right in France, Italy, Spain, Portugal, Greece and other countries is being punished because of the crisis. The European Socialists can recover. The French Socialist will lose, but the British Labour Party - that lost the election in 2009 - will be resurrected. Christian-Democrats and Socialists will compete to be the biggest group at around 220 seats.

The Know Nothing President

President Obama is in a digital two-front war. The computers of the National Security Agency (NSA) are so modern that they can spy on the citizens of the world, including their leaders. The computers of Obamacare, the federal program for a universal health insurance, are so dysfunctional that the software blocked at the start. As things stand, there are more Americans who lost their insurance than Americans who managed to get new insurance. But the President of Hope and Change knows nothing. He is utterly unaware.

Obama claimed to know nothing about the NSA spying on foreign - especially allied - leaders. The German weekly Der Spiegel shows this week how the NSA is spying on Germany, starting with the mobile phone of Chancellor Merkel. This is a sensitive issue in a country that has both the Gestapo and the Stasi in its collective memory. Bild am Sonntag argues that NSA Director Keith Alexander informed Obama in 2010 about the spying on Merkel. Obama would want to know everything and would have asked to make a 'file'. The NSA said Monday, at the insistence of the White House, that Obama 'knew nothing'.

This isn't very credible. On 1 September it turned out that the NSA was overhearing calls of Brazilian President Dilma Rousseff. Obama tried to soothe the incident and claimed 'to know nothing', but the Brazilians were so angry that Rousseff canceled a state visit to the U.S. If Obama had been more alert, he would have stopped spying on allies at that point. But he did not and stayed vague ('others do it too') until it appeared that 35 state leaders are on the NSA radar.
 

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