Editorial June 15: Bank Contagion
The bank crisis is slowly but surely spreading over EU countries. We are not experts on the topic but the issue is more what does it tell us about our political leaders priority setting, the effectiveness of the cure of austerity measures and the consequences on the treated population?
For those who have not seen Soderbergâ€™s movie, here is a useful metaphorical pitch: â€śContagionâ€ť â€śfollows the rapid progress of a lethal airborne virus that kills within days. As the fast-moving epidemic grows, the worldwide medical community races to find a cure and control the panic that spreads faster than the virus itself. At the same time, ordinary people struggle to survive in a society coming apartâ€ť.
Greece has been for the last two years at the virus epicentre which has now spread to the heart of Europe: the manifestation of the disease is reaching a new peak: the 800 million â‚¬ a day withdrawal from Greek banks is in fact being financed by the rest of the eurozone. The virus entertains a vicious circle, attracting to its centre exposed foreign banks which lend money to an indebted country. Every 1,000 euros withdrawn from the Greek banks increases the European Central bankâ€™s exposure to an eventual euro exit by Greece by precisely 1,000 euros.
Now, after Greece, Portugal and Ireland, the virus spread to Spain with a request for as much as 100 billion euros in loans to rescue its banking system.
The panic: â€śNo to the European cureâ€ť
Meanwhile Italy is getting the fever: its debt is reaching 2,000 billion Euros, and its debt 123% of its GDP. The country is falling into recession and the fear of contamination triggers suspicion among its neighbours. On June 12 Austria's finance minister already assessed Italy as contaminated when saying that it may need a financial rescue because of its high borrowing costs (6,2%). Willing to stress the good health of his country, Mario Monti responded that his country was immune with a harsh denial on Tuesday.
Cyprus has already the bug and knows that it is next on the list of the bank crisis, contaminated by its exposure to the Greek debt. However, deterred by the austerity measures in Greece, it prefers instead to turn to Russia or China for financial assistance. Ireland which was one of the first patients treated by austerity measures would like to renegotiate the conditions of the bailout.
Major private EU companies such as EADS with 12 billion euro saving are considering formation of an in-house bank to protect its own access to credit and that of its customers as Europe's financial crisis shows little sign of coming to an end.
Meanwhile, â€śordinary people struggle to surviveâ€ť
According to a recent poll requested by the International Trade Union Confederation (ITUC) of 12 June 2012, there is a widespread conviction among global citizens that international banks (67 %) and large corporations (65 %) have too much influence on economic decision-making. In the selected EU countries, 59% of respondents believe that their country is going in the wrong direction. 58% say they have seen their family incomes fall behind the increase in the cost of living. 14% are struggling financially and can no longer pay for basic living expenses like housing, food and electricity; 64% are no longer able to save any money.
However the bank crisis is the priority of our decision makers. The fight against poverty is obviously absent from their treatment. Their commitment to lift up 20 million people out of poverty is not implemented. The addition of their national commitments amount to a maximum of 12 millions people, missing out at leat 8 million people living in poverty in Europe. When they do try to address poverty, they want to do it by getting people into employment when the unemployment rate in the EU has never been as high before (10,3%).
When addressing the labour market, the proposed cure is no better. The Commission recommendations to head of states for the June Council are to increase precariousness on the labour market. The word quality is never linked to employment in the specific recommendations and most of them aim at lowering employment protection and thus the quality of employment. They request for example: â€śadjust employment protection legislation as regards permanent contracts in order to reduce labour market segmentationâ€ť.
The aversion from some EU leaders to austerity measures, but more importantly from the EU population, says it all: the medicine isnâ€™t working.
Social Platform Director