Rather than solving Europe’s crisis, EU institutions are allowing corporate elites to further enrich themselves through a fire sale of state assets.
The text and infographics below are excerpted from a new working paper, Privatising Europe: Using the Crisis to Entrench Neoliberalism, which was just released by the Transnational Institute in Amsterdam:
The European Union is currently undergoing the biggest economic crisis since its foundation 20 years ago. Economic growth is collapsing: the eurozone economy contracted by 0.6% in the fourth quarter last year and this slump is set to continue. The euro crisis was incorrectly blamed on government spending, and the subsequent imposition of cuts and increased borrowing has resulted in growing national debts and rising unemployment. Government debts in crisis countries have predictably soared: the highest ratios of debt to GDP in the third quarter of 2012 were recorded in Greece (153%), Italy (127%), Portugal (120%) and Ireland (117%).
Europe’s member states have responded by implementing severe austerity programmes, making harsh cuts to crucial public services and welfare benefits. The measures mirror the controversial structural adjustment policies forced onto developing countries during the 1980s and 1990s, which discredited the International Monetary Fund (IMF) and World Bank. The results, like their antecedents in the South, have punished the poorest the hardest, while the richest Europeans – including the banking elite that caused the financial crisis – have emerged unscathed or even richer than before.
Behind the immoral and adverse effects of unnecessary cuts though lies a much more systematic attempt by the European Commission and Central Bank (backed by the IMF) to deepen deregulation of Europe’s economy and privatise public assets. The dark irony is that an economic crisis that many proclaimed as the ‘death of neoliberalism’ has instead been used to entrench neoliberalism. This has been particularly evident in the EU’s crisis countries such as Greece and Portugal, but is true of all EU countries and is even embedded in the latest measures adopted by the European Commission and European Central Bank.
This working paper gives a broad and still incomplete overview of what can best be described as a great ‘fire sale’ of public services and national assets across Europe. Coupled with deregulation and austerity measures, it is proving a disaster for citizens. Nevertheless, there have been clear winners from these policies. Private companies have been able to scoop up public assets in a crisis at low prices and banks involved in reckless lending have been paid back at citizens’ expense.
Encouragingly though, there have been victories in the battle to protect and improve Europe’s public services which serve as beacons of hope. There is even a counter-trend of remunicipalisation taking place in Europe as people have become aware of the cost and downsides of privatising public services, particularly water. As public awareness grows that the European Commission far from solving the crisis is using it to entrench the same failed neoliberal policies, these counter-movements and growing popular resistance can work together to halt the corporate takeover of Europe.
There seems to be a myth doing the rounds at the moment that the 2008 Blanket Bank Guarantee, which ran for 2 years from September 2008 until 2010, wasn’t put in place to simply stop both Anglo Irish Bank and Irish Nationwide from collapsing in order to protect, as far as possible, the considerable interests that a small group of Irish people had in those cauldrons of greed and corruption.
Rather, popular thinking now goes, the notorious guarantee was put in place because of pressure from the ECB who were eager to ensure that revenue from Irish taxes would be used to pay bondholders in the banks of Core EU countries in full.
Take this recent article published on the 27th of March last which has the headline: “Germany’s rethink on just where the blame lies for the Irish bank bailout”. The implication behind the headline is that the bailout was required because of the guarantee, but also suggests that the statement made by the German Finance Minister that the Irish guarantee was a solely Irish initiative is a ‘rethink’, that is, an attempt to change the narrative that the bailout, and the guarantee that made it inevitable, was dictated by interests of big German banks.
“It was the Irish government that imposed the farthest-reaching guarantee for its banking system at the start of the crisis – on its own initiative,” said German finance minister Wolfgang Schäuble.
The statement itself was prompted by comments made by Irish politicians while negotiating on bank debt. Such comments, of course, are tailored to an Irish audience who are increasingly convinced that the enormous and unsustainable burden of Irish bank debt which the residents of Ireland are being forced to finance is being imposed by the ECB and Germany in order to protect their own struggling banks. This particular framing of the story feeds into the tale told about Timothy Geithner’s phone call and the posthumous yarn about the letters Brian Lenihan received from Jean-Claude Triche.
These Irish politicians are entirely aware, however, that the decision to provide such a broad guarantee was made without the advanced knowledge of the ECB. It is a consequence of this decision which was only put in place to maintain access for Anglo Irish Bank and Irish Nationwide to the interbank market that the vast majority of bonds have been paid off in full.
We know this because on the 3rd of Oct 2008 the ECB published an opinion on the Irish bank guarantee. Here’s the relevant excerpt.
“As a further general comment, the ECB notes that the Irish authorities have opted for an individual response to the current financial situation and not sought to consult their EU partners. In view of the similarities of the causes and consequences of the current financial distress across EU Member States and the potential interdependencies of policy responses, it would have been advisable to properly consult other EU authorities on the envisaged legislative plans.
2.5 A further point relates to the risks to the Government’s budgetary position arising from any financial support to Irish credit institutions. While the ECB appreciates that any guarantees provided by the Minister under the draft law would be contingent in nature, given that the financial exposure of the Irish State under such guarantees is potentially very large, the Irish Government could be obliged to make significant payments in case these guarantees are called over the next two years. At a point in time when the Irish budgetary position is deteriorating and may risk exceeding the 3 % of GDP reference value for public deficits, as specified under Community law12, this is a cause for concern, even when the provision of financial support would, under the draft law, as far as possible ultimately have to be recouped from the credit institution or subsidiary in question.”
via Irish Left Review.
via Irish Left Review.
We’re going to need a bigger acronym.
In the beginning, it was just the “Greek debt crisis“. Then markets realized Portugal, Ireland, Italy, and Spain were in bad shape too, and the PIIGS (or GIIPS) were born. But now Cyprus and Slovenia have run into trouble as well, giving us the … SIC(K) PIGS? At this rate, we’re going to have to buy a vowel soon, assuming Estonia doesn’t end up needing a bailout.
The euro crisis is entering its fourth year, and, sorry world, this won’t be its last. Now, its long periods of boredom have gotten a bit longer, and its moments of sheer financial terror a bit less terrifying ever since the European Central Bank (ECB) promised to do “whatever it takes” to save the common currency. But, as Cyprus and Slovenia show, the battle for the euro isn’t over yet. Not even close.
Here’s the Cliff Notes version of the euro crisis. The euro zone doesn’t have the fiscal or banking unions it needs to make monetary union work, and it’s not close to changing that. In the meantime, the euro’s continuing flaws continue to suck countries into crisis. And their politics get radicalized. Most recently, Cyprus was forced to accept a bailout and bail-in, because its too-big-to-save banks made some horrendously bad bets on Greek bonds. Slovenia looks like it could next on the euro-bailout tour, because, as Dylan Matthews of the Washington Post points out, its too-big-to-save-ish banks made some horrendously bad bets on its own companies. Now, banks make bad bets all the time, but those bad bets can bankrupt you as a country if you don’t have your own central bank. Like euro countries.
Of course, this “diabolic loop” between weak banks and weak sovereigns isn’t the only problem in euroland. The common currency has plenty of other flaws. Here’s why the euro, as it’s currently constructed, is a doomsday device for mass bankruptcy. (How’s that for solidarity?).
1. Too Tight Money
The euro zone isn’t what economists call an “optimal currency area”. In other words, it was a bad idea. Its different members are different enough that they should have different monetary policies. But they don’t. They have the ECB setting a single policy for all 17 of them. That’s a particular problem for southern Europe now, because their wages are uncompetitively high relative to northern European ones, and the ECB isn’t helping them out.
There are two ways to fix this intra-euro competitiveness gap. Either northern European wages rise faster than normal while southern wages stay flat, or northern European wages grow normally while southern European wages fall. It’s the difference between a bit more inflation or not — in other words, between looser ECB policy or the status quo. Now, it might not sound like it really matters which option they choose, but it very much does. Falling wages make it harder to pay back debts that don’t fall, setting off a vicious circle into economic oblivion. The ECB apparently prefers pushing more and more countries into oblivion with too tight money than risk anything resembling more inflation.
2. Too Tight Budgets
Austerity has been a complete disaster. It’s actually increased debt burdens across southern Europe, because it’s reduced growth more than it’s reduced borrowing costs. And now northern Europe is getting in on the act. France (which is really somewhere in between “southern” and “northern”) just missed its deficit target, and is set to slash more; the Netherlands has put through contentious tax hikes and spending cuts, even as its economy has shrunk; and even Germany is contemplating new budget-saving measures. In other words, the euro has become an austerity suicide pact.
3. Too Little Trade
Excluding Germany, just over half of all euro trade is with each other. But with bad policy pushing southern Europe into depression and northern Europe towards recession, euro zone countries can’t afford to buy as much stuff from each other. That adds a degree of difficulty to recovery for southern European countries that need to export their way out of trouble. As you can see in the chart below from Eurostat, intra-euro zone trade has stagnated the past few years after rebounding from its post-crash depths. The euro zone’s weak links are dragging the rest down — but only because the rest refuse to pull the weak ones up.
4. Too Much Financial Interconnection
Other country’s problems can quickly become your own if your banks own their bonds. Especially if your banks are bigger than your economy. That’s the lesson Cyprus learned the very hard way after its banks loaded up on Greek debt in 2010, only to get wiped out a year later. The Financial Times has a great infographic (that you should play around with) on which country’s banks are exposed to which other country’s debt across the euro zone. As you can see below, any kind of Italian restructuring would be tremendously bad for French banks.
The euro is the gold standard minus the shiny rocks. Both force countries to give up their ability to fight recessions in return for fixed exchange rates and open capital flows. But giving up the ability to fight recessions just makes it easier for recessions to turn into depressions. And that puts all of the pressure on wages to adjust down when a shock hits — the most painful and destructive way of doing things.
But the gold standard had an even bigger design flaw than creating depressions. That was perpetuating depressions. Under the rules of the game, countries short on gold were supposed to raise interest rates, which would push down wages, and push up exports. More exports would mean more gold, and then lower interest rates. But there was an asymmetry. Countries needed gold to create money, but countries didn’t need to create money if they had gold. During the Great Depression, the U.S. and France sucked up most of the world’s gold, but didn’t turn it into money out of fear of nonexistent inflation. Countries that needed gold needed to push down wages even more to make their exports competitive — not that there were any booming markets for them to export to, due to the self-inflicted economics wounds of the U.S. and France. Instead, the depression just fed on itself.
The euro suffers from a similar asymmetry. Debtor-euro countries are to cut wages and deficits, but creditor-euro countries aren’t forced to increase wages and deficits. Perversely, the opposite. In other words, northern Europe isn’t doing enough to offset the demand destruction in southern Europe. And it’s sinking them all. Even worse, this slow-motion collapse is turning loans that would have otherwise been good into losses — losses that force bailouts and faster collapses. But, to be clear, this isn’t only a problem for the periphery. As the U.S. and France found out in the 1930s, it’s generally not a good idea to force your customers into bankruptcy. That just creates depression without end — until the gold (or euro) standard ends. It’s no coincidence that the countries that ditched the gold standard first recovered from the Great Depression first.
History doesn’t need to repeat, or even rhyme. Europe doesn’t have to keep crucifying itself on a cross of euros, the gold standard of the 21st-century. The euro’s northern bloc could decide to let the ECB do more. Or it could decide to start spending more. Or not. Eurocrats seem content to do just enough to keep everything from falling apart, and nothing more. It’s one part inflationphobia, and another part strategy. Indeed, it’s how they try to keep the pressure on the southern bloc to push through unpopular labor market reforms. But doing enough today eventually won’t be enough tomorrow if the southern bloc doesn’t have any hope of recovering within the euro. The politics will turn against the common currency long before that.
By that point, Europe won’t need an acronym anymore.
With laws that make foreclosures almost impossible and a financial sector stuffed full of bad loans, the Emerald Isle’s problems might only just be getting started
Among the many nasty side-effects of the European debt crisis, bigotry’s return to pleasant conversation may be the least-commented upon, and the nastiest.
Granted, few actually say Germans are power-hungry, anal-obsessed skinflints. And it’s only usually hinted broadly that Spaniards are hot-blooded, undisciplined spendthrifts; and Greeks shiftless tax-dodgers. Those people, you know?
Likewise, Ireland’s debt-fueled housing boom and banking bust–which eventually dragged the entire country under–is often dressed in ethnic livery. The Irish went on a bender and they’re dealing with the hangover. They’re guilty, have confessed their sins and willing to years of painful austerity budgets as penance.
That last bit, the submission to painful remedies demanded by foreign authorities, has earned Ireland something of a starring role in the ongoing European morality play: that of “the good debtor.” (“Greece has a role model and the role model is Ireland,” Jean-Claude Trichet, former chief of the European Central Bank, famously said back in March 2010.)
But this overlooks a few uncomfortable details. Ireland’s homeowners are the European and perhaps the world champions in not repaying mortgages. The country’s national debt has increased fourfold in about as many years. Its banking system is being kept afloat by borrowing from Europe. And while a change in the law may soon force the banks to start cleaning up their balance sheets, nobody is quite sure how bad a mess they will find there when they do.
Welcome to Ireland, where the hangover is in fact just beginning.
In the last few years, a staggering number of Irish homeowners have simply stopped making mortgage payments. The Irish central bank says that at the end of December 2012, 11.9% of Ireland’s mortgages were late by more than 90 days, up from September’s 11.5%.
And the truth is probably even worse. The chart above, which was produced by Deutsche Bank using Moody’s data, pegs the percentage of Irish mortgages that are three months late somewhere closer to 16% in September. S&P analysts argue that 25% of Ireland’s home loans are in some kind of trouble, either behind on payments, or in foreclosure, or in forbearance, which is when the bank just isn’t collecting payments. (We’ll get to why later.)
Why? To be sure, things are tough in Ireland. The recession has driven unemployment from less than 5% at the end of 2007 to more than 14%. Incomes have crumbled.
But Greece is in an even worse economic crunch. Unemployment is at 27%. The economy has shrunk by 25% since the end of 2007. Newly impoverished people are turning to firewood because they can’t afford heating oil. And even so, the amount of Greek mortgages in late-stage arrears was only 5.1% in November, according to Fitch Ratings.
What’s going on here?
Safe at Home
The simple answer is that Ireland is one of the hardest places in the world to drive a family from its home. Though thousands aren’t paying, repossessions of Irish homes remain “negligible relative to the level of arrears,” according to a recent report by Moody’s analysts.
The most recent update on repossessions from the Irish central bank shows that during the entire fourth quarter of 2012 only 38 houses were repossessed by court order. At a pace like that, it would take more than 620 years to get through the backlog of nearly 95,000 mortgage accounts that are at least 90 days behind on payments.
The chart to the right is a look at the levels of problematic loans–that is, loans in arrears–in Ireland and neighboring Britain. In Ireland, repossessions are effectively non-existent.
In fact, Moody’s analysts note that the number of Irish delinquent on their mortgages shot higher in 2012, just as political discussions centered on the possibility of a large-scale debt forgiveness plan. (It never materialized.) Moody’s suggested that the increase was driven–at least in part–by some who are gaming the system. “The current dearth of repossessions and the recently proposed personal insolvency legislation is starting to result in higher defaults due to moral hazard,” the analysts wrote.
That’s financial-speak for “people think they can get away without paying their mortgage because they know they’re not going to lose their house.” Gregory Connor, a professor of finance at the National University of Ireland in Maynooth, estimates that about 35% of those who have fallen into arrears on their mortgages have done so “strategically.” That is, they can afford to pay, but just aren’t.
Birthplace of the Boycott
There are any number of explanations for the dearth of Irish foreclosure. For one thing, Irish courts ruled in July 2011 that Ireland’s recently revamped foreclosure law contains a massive loophole. Long story short, the judge found that the law allows lenders to foreclose only on mortgage loans made after Dec. 1, 2009, when the new law went into effect. After the judgement, arrears shot higher.
The legislature could fix the the problem by passing a new law. But it hasn’t (although one is expected soon). And that’s likely because any Irish politician introducing such a bill would be brave indeed, given long-standing antipathy towards foreclosure and evictions among the Irish public.
After all, modern Irish patriotism first coalesced as a revolt against unfair evictions during the so-called land wars of the late 1800s. The period gave Ireland some of its earliest and most enduring political heroes–Charles Stuart Parnell, Michael Davitt–and villains, such as Charles Boycott, an unpopular, English-born magistrate and collector of rents from Irish tenant farmers. He gave his name, or rather he had it given for him, to the method of organized, non-violent shunning of which he was the subject until he was ultimately driven from the island.
Ancient history? Perhaps. But the notion of the sanctity of the family home still carries considerable weight in Ireland. In fact, the inviolability of a citizen’s dwelling is laid out starkly in article 40, sub-paragraph 5 (pdf, p. 158) of the constitution. So present is Ireland’s unpleasant history with eviction that Irish prime minister Enda Kenny felt compelled to give it a nod when he introduced a new personal insolvency bill last year. “There is probably no time, since the Land War, when the Irish people have felt so stressed, so anxious about their home and their family’s future security,” Kenny said. Given such historical and political backdrops, it shouldn’t be a surprise that Ireland’s legal and regulatory system is, as Moody’s put it in a euphemistic moment, “borrower friendly.”
You Really Owe It to Yourself
But historical roots or not, Ireland’s arrears mess is a real problem. It means somebody lent money and is at increasing risk of not getting it back. So who might not get paid back if Irish homeowners continue on their current path of flaky repayment? Here, things get a little bit circular.
You see, during the boom years Irish banks made the bulk of house loans that are now going bad. But the Irish government–that is, the taxpayers–now owns a large share of those banks, thanks to the roughly €64 billion ($82 billion, or 40% of GDP) it has poured into them since 2008, according to S&P analysts. So in a sense, Irish homeowners owe this money to Irish taxpayers, who are one and the same.
But wait, there’s more.
You see, Ireland itself didn’t just happen to have €64 billion lying around. It had to borrow it. Here’s what that did to Ireland’s debt-to-GDP ratio, which has surged since Ireland issued a blanket guarantee on bank deposits and debt in 2008:
High Irish debt levels spooked the markets, as investors lost faith Ireland would ever be able to manage under the burden. Ireland ultimately had to itself be bailed out by a €67.5 billion line of credit from the “troika” (the ECB, the IMF, and the EU) on Nov. 28, 2010. And in a sense, that means that some of the risk of Ireland’s derelict homeowners is being born by its European neighbors.
Nor did Ireland’s bailout mean its financial system was magically returned to the good graces of the markets. Its partially nationalized financial institutions still depend largely on borrowing from central banks to keep the lights on. The banks post some of their assets as collateral and get cash in exchange. Here is a chart of ECB lending to Irish banks, and you can see it surging as Ireland’s financial crisis worsened. It has fallen quite a bit over the last couple of years. But there were still €61.88 billion in ECB loans out to banks in Ireland at the end of February.
The Europeans Have Noticed
Ireland’s European lenders–the EU, the IMF and the ECB–know that the surge of bad mortgages is exposing them to increasing amounts of risk. And they don’t like it. In fact, in their latest report card on Ireland’s bailout program, they laid out steps the Irish government had to take to update the loophole in the 2009 foreclosure law, the one blamed for holding up foreclosures and repossessions. Those changes to the law are to be made “so as to remove unintended constraints on banks to realize the value of loan collateral.” In other words, the troika is telling Ireland to make it easier for banks to repossess and sell properties. Irish legislators are expected to pass a revamped law removing the loophole this summer.
So What’s the Real Risk Here?
Nobody really knows.
Despite the fact that the Irish government yanked a ton of toxic assets out of Irish banks and put them into a “bad bank” known as the National Asset Management Agency (NAMA), and despite the fact that the Irish government has stuffed about €64 billion into the bank’s cash cushion, “the Irish banking system has not yet fully stabilized,” wrote Moody’s analysts in a January report. Short version: Irish banks own a ton of bad mortgage assets. (See the chart to the right.) But these are just the bad loans that we know of. Some think the true position of Irish banks may be even worse.
Some suspect it’s not just legal haziness keeping foreclosures low. Irish banks may also dragging their feet on restructuring or foreclosing. That’s because if they dealt with those problem loans by foreclosing or restructuring them it would, through the magic of accounting, transform hazy “problem” loans into real losses. In fact, there’s a well-documented history of banks procrastinating on recognizing bad loans in the aftermath of financial crises. Such widespread “evergreening” of bad loans was an insidious side effect of Japan’s financial collapse in the early 1990s.
And even if Irish banks do start dealing en masse with problem loans, it’s unclear how it could play out. On the one hand, it could mean more people in Ireland start to pay their mortgages, for fear of losing their homes. But a large wave of bank foreclosures could also “throw up evidence of under-reserving by banks as they start to close out some nonperforming mortgages,” according to a January report from Standard & Poor’s banking analysts.
In other words, it could reveal banks to be in worse financial shape than everyone thought. By extension, Irish taxpayers, the Irish government and its European rescuers would have to admit they face more risk than they knew. That would be a major embarrassment for both the Irish government, as well as its euro-zone sponsors, which have built up Ireland’s reputation as a debtor nation doing everything right.
The Bottom Line
But the growing pile of defaulting home loans holds other risks for Ireland. For one, it’s choking off the flow of capital to the economy.
Let’s remember why we even bother putting up with banks. They’re supposed to be good at doling out capital efficiently. They take the unused savings of society and channel it toward productive uses–at least in theory. But if banks coming out of a financial crisis start practicing widespread forbearance and evergreening of loans, they become less and less efficient at their job, because so much of their capital is tied up in bad loans instead of getting put to good use.
That’s part of what’s happening in Ireland right now. You can see, mortgage lending has pretty much collapsed.
Now, lending would logically fall after a financial crisis triggered by too much debt. But it will have to stop falling before the domestic economy starts growing.
That’s why Ireland must overcome its anti-eviction tendencies and clear the backlog of bad loans. And it’s not just the homeowners that will feel the pain through necessary foreclosures and repossessions. Banks must fess up to their losses and restructure bad debts.
It won’t be pretty or easy. But for the Irish government–so often dominated by the European powers that bailed the country out–it’s one of the few areas where it can still act. As for the European officials who have built Ireland’s painful austerity push into the “model” response for troubled European countries? They’re going to have to admit even supposedly virtuous Ireland is having serious difficulties making austerity work.
The protestors from Ballyhea and Charleville in Co Cork are meeting members of the European Parliament’s Economic and Monetary Affairs committee, including its chairwoman, Sharon Bowles from Britain’s Liberal Democrats.
The group said the ultimate goal of its travel was to seek assistance in securing a meeting with the European Central Bank, which it holds responsible for pushing Ireland into a sovereign bailout to save its banking sector.
Campaign founder Diarmuid O’Flynn told radioep.ie it was his ultimate goal to get a meeting at the Frankfurt-based bank so he could ask it to explain its actions.
Members have already travelled to Frankfurt to seek such meetings, but have met with little success.
“We’re hoping that first of all as a member of the parliament – but secondly as a member of the Economic Committee – that she [Bowles] has some influence with the ECB,” O’Flynn told radioep.ie’s Karen Coleman. “We’re hoping she can do something for us. I don’t know if she can.”
O’Flynn – a sports writer with the Irish Examiner by day – said ultimately it was his hope to speak and negotiate directly with the bank.
I would like to somebody in the eye in the ECB, and ask them to justify what they have done to the Irish people.
To justify what they have done: all the lies that they told us, all the bullying that went on, all the blackmailing that went on… that unless you accept this bank debt, we’re going to pull the plug on the other funding.
I would like to look someone [in the eye] in the ECB – not somebody at the bottom, somebody at the top – to justify what they have done to us.
The group is bringing a number of letters, directly addressed to Bowles, written by ordinary people in Ireland outlining how they have been affected by the crash and by the austerity that has followed the bailout.
On the group’s Facebook page, O’Flynn acknowledged that trying to unilaterally seek negotiations with the ECB was “a big ask”, but said:
“If you don’t ask, and our highly-paid government negotiators didn’t, then you have no chance.”
Goldman Sachs Group Inc. (GS), the investment bank nicknamed “Government Sachs” because of senior executives who have moved into public posts, won’t be entering politics itself.
A shareholder proposal that the New York-based company run for office instead of funding political campaigns was discarded, according to a letter last month from the Securities and Exchange Commission, which agreed the firm can exclude the measure from its annual meeting.
Harrington Investments Inc. President John Harrington submitted the proposal last year, saying the $6.39 million in 2012 political contributions from the firm’s employees risks doing more harm to its reputation. He said the bank should explore running for office, using a U.S. Supreme Court ruling that corporations have similar political rights to individuals.
“It would be less damaging to the integrity of our political system and our company, for our corporation to directly run for office as a person under federal or state law, than to continue in the current form of political participation,” Harrington wrote in the proposal.
Goldman Sachs said in a letter to the SEC that it “currently has no involvement, never has had any involvement, and has no plans to become involved in the business of running for political office.”
The bank also said that its political action committee is funded by voluntary employee contributions, not shareholder money. The Supreme Court’s 2010 Citizens United ruling gave corporations the same rights as individuals to spend money independently to support candidates.
Harrington Investments provides advisory services for investors “who want their investment portfolios to serve progressive environmental and social objectives while yielding positive long-term returns,” according to its website. The firm expressed its support for Occupy Wall Street protesters.
Two former Goldman Sachs chiefs, Henry Paulson and Robert Rubin, served as U.S. Treasury secretaries after leaving the firm, and another, Jon Corzine, represented New Jersey in the U.S. Senate and as governor. Mark Carney, the incoming Bank of England head, European Central Bank President Mario Draghi and Federal Reserve Bank of New York President William Dudley are among company alumni now setting monetary policy.
Harrington said he will continue to search for ways to bring up the issue of corporate political involvement, as well as the balance of power between shareholders and companies’ management teams and boards of directors.
“It’s too bad we didn’t get it on the ballot, it would have been a good discussion piece,” Harrington said today in a phone interview. “You begin to see a pattern of how much influence corporations have on our political balance, and now it’s so skewed that you figure, ‘Why don’t we have Goldman run for president and JPMorgan Chase run for vice president.’ And that way, they can run the system for real.”
I have been watching articles pour forth about Cyprus all weekend. I am almost
as aggravated with the majority of them as I am with what took place. People are
dancing around the edges while the propaganda machines of Europe are
churning out the usual bunk.
Let’s get some things
straight and look what has happened directly in the face. There was no
tax on the bank accounts in Cyprus. There still is no tax; the Cyprus Parliament
has not passed it and will not vote on it until tomorrow so whatever action
takes place it is retroactive. Next, this was not enacted by Cyprus. The people
from Nicosia did not go to the Summit and ask to have the bank accounts in their
country minimized to help pay the bills. Far from it; the nations of
Europe, Germany, France, the Netherlands and the rest, demanded that this take
place, a “fait accompli,” the President of Cyprus said and Europe
annexes Cyprus. Let’s be quite clear; the European Union has confiscated the
private property of the citizens in Cyprus without debate, legislation or
A bank account is not a bond or a stock
or any sort of investment. This seems to be lost on many people. A bank
account is the private property of a citizen or a corporation and does not
belong to the government or at least that was the supposition up until now in
Next there is deposit insurance in Europe.
Every country has its own version but it is there. It guaranteed the bank
accounts of citizens up to one hundred thousand Euros. So much for the meaning
of any guarantee in Cyprus or any other country in Europe. Null and Void! If the
European Union can dismantle deposit insurance in Cyprus they can damn well do
it in whatever country they please and at any time.
Here’s the description of the Cypriot government deposit insurance plan:
“Participation in the DPS is compulsory for all banks authorized by the Central Bank of Cyprus, i.e. banks incorporated in the Republic of Cyprus, including their branches in other countries, and the Cyprus branches of foreign banks, incorporated outside the Republic of Cyprus or the Member-States of the European Union. The DPS does not cover deposits of branches of banks established in European Union Member States. These deposits are covered by the corresponding deposit protection scheme established in the country of incorporation.
The DPS is activated in the event a decision is reached that a member bank is unable to repay its deposits, or as a result of a Court’s order for the winding-up of a member bank. Where a bank is unable to pay its deposits, the relevant decision is adopted by the Central Bank of Cyprus or, where a member bank is incorporated in a country outside the Republic of Cyprus, by the competent supervisory authority of the country of incorporation.
The maximum level of compensation, per depositor, per bank, is €100.000.”
Please note that until yesterday all depositors in Cypriot banks were insured up to the value of €100,000 with any one bank. Today that solemn governmental promise has been shown for what it is; a lie. Worse and actually far worse and quite scary in fact is that the European Union and the European Central Bank and the IMF has not just allowed violation of the deposit insurance but demanded it. One thing is certain here; if they can void deposit insurance in Cyprus then they can void it in any country in Europe. Further; if they can void deposit insurance then they can void bond covenants with the scratch of a pen on paper. Nothing now; Nothing is safe!
Pay attention please. The European Union and the European Central Bank and the IMF have just advocated the confiscation of private property for their own indulgence. Bank accounts are not bonds or stocks or some other form of investments. It is private property like your house or your car. Germany, France et al came in and said, “We want it and we are taking it and it is necessary for our government.” These countries did not demand it, yet, from their own citizens though they might soon but they demanded it from the citizens of Cyprus in exchange for funds. This is not a European Union this is a European Fourth Reich!
“The moment the idea is admitted into society that property is not as sacred as the law of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence.”
Eurozone nations have to fundamentally reorganize themselves and shift sovereignty away from national parliaments to new layers of centralized, transnational, beyond-control bureaucracies that can decide at will when to extract untold wealth from taxpayers. That’s what the Eurozone has to do, according to the “first ever European Union-wide assessment of the soundness and stability of the financial sector,” released Friday by the institution that the world couldn’t do without, the IMF.
“Financial stability has not been assured,” the report stated flatly about the fiasco in the Eurozone, despite ceaseless hope-mongering by Eurocrats and politicians, and banks remain “vulnerable to shocks.” The report, which never mentioned banks or countries by name, discussed a number of “risks” that could topple these banks, with some of these “risks” already having transitioned to reality:
“Declining growth.” Banks with “excessive leverage, risky business models, and an adverse feedback loop with sovereigns and the real economy” are particularly vulnerable. Hence, most banks. A number of European countries have been in a deep recession, some of them for years. So “declining growth” is a reality, and these “shocks” are happening now, said the IMF in its more or less subtle ways.
“Further drop in asset prices.” Real estate prices are now dropping in some countries that didn’t see a collapse during the first wave, including France and the Netherlands—where it already took down SNS Reaal, the country’s fourth largest bank [A Taxpayer Revolt Against Bank Bailouts In the Eurozone]. So hurry up and do something, the IMF said.
The report points at other risks for banks. Pressures in wholesale funding markets could dry up liquidity and tighten refinancing conditions. And the market could lose confidence in the sovereign debt that banks hold. For example, an Italian bank, loaded with Italian government debt, would topple if that debt lost value—but of course, the report refuses to name names.
And in “several countries,” the heavy concentration of megabanks “creates too-big-to-fail problems that could amplify the country’s vulnerability.” So Germany, France, and the UK. Alas, in Europe too-big-to-fail doesn’t necessarily mean big. In tiny Cyprus, fifth country to get a bailout, the banks, though minuscule by megabank standards, are getting bailed out anyway. It’s psychological. A fear. If even a small bank were allowed to go bankrupt, the confidence in all banks across the Eurozone would collapse. That’s how fragile Eurocrats and politicians fear their banks have become—despite their reassurances to the contrary.
And so “policymakers and banks need to intensify their efforts across a wide range of areas” to save these banks, the IMF exhorts these Eurocrats and politicians.
Big priorities: “bank balance sheet repair”; banks should build larger capital buffers to be able to absorb shocks. And “credibility” repair of these balance sheets. In an admission that bank balance sheets still aren’t worth the paper they’re printed on, the IMF calls for stiffening the disclosure requirements, “especially of impaired assets” that are decomposing in hidden-from view basements.
The new Single Supervisory Mechanism (SSM), the EU-wide banking regulator under the ECB, to be operational by early 2014, would have to have real teeth, along with expertise, the IMF pointed out. It should regulate all banks in the Eurozone “to sustain the currency union” and in the entire EU to sustain “the single market for financial services.” In other words, without the SSM, the currency union won’t make it.
But the IMF’s killer app is the Banking Union, a “single framework for crisis management, deposit insurance, supervision, and resolution, with a common backstop for the banking system.” Under this system, taxpayers in all Eurozone countries would automatically be responsible for bailing out banks, their investors, bondholders, counterparties, and account holders in any Eurozone country.
For the most hopeless cases, the Single Resolution Mechanism would step in to dissolve banks “without disrupting financial stability”—hence bail out investors, disrupting financial stability being a term that’s commonly used to justify anything. The medium would be the transnational taxpayer-funded ESM bailout fund; it would bail out banks directly, rather than bail out countries after they bail out their own banks—which is the rule today.
In the process, countries would surrender much of their authority over banks—and how or even whether to bail them out—to this new instrument. Decision makers would be Eurocrats, far removed from any popular vote. Victims would be the people who’d end up paying for it. Investors and speculators would profit. Other beneficiaries would be politicians who’d no longer have to bamboozle voters into bailing out banks because it would be done by a distant power.
The dictum that there is never an alternative to bailouts would be cemented into the system. Democracy, which always gets trampled during bailouts, would be essentially abolished when it comes to transferring money from citizens to bank investors. And that’s of course the ultimate goal of the banking industry.
The stark reality facing millions of Spaniards, Italians, Greeks, and Portuguese is hidden—buried deep under a mountain of economic data, massaged to suit the purposes of the central planners-in-chief.
Ireland take note your water supply is in danger
Hello from snowy Vienna. We have had a wonderful day. Over 300 people and a lot of media attended this important conference today. People in Europe have been fighting water privatizations for over a decade and have started a process of reversal, leading to the remunicipalization of many water services, including some major cities, such as Paris.
But in a classic example of what Naomi Klein calls the shock doctrine, the European Commission and the European Central Bank are using the financial crisis to promote an “austerity” program that includes privatization of water services in a number of countries. Already, water prices have been dramatically raised in some cities, leading to water service cut offs and even evictions.
The Citizen’s Initiative is a most exciting counter-force to this provocation and growing every day. Not satisfied with the one million signatures they have succeeded in getting, the group is now aiming at over two million.
I told them how important their work is and that they have support all over the world. Austrians value both their water sources, which they take very good care of, and the public nature of its delivery. But I told them how fast that can change, and pointed to our federal government and how they are using funding as a tool to force P3s on municipalities and that they must be vigilant.
Two things to note: although it was a labour backed conference, no one seemed to know about the Canada-European Union CETA. And there is a big debate on whether the EU can be reformed, or whether it has just become a tool of neo-liberalism.
Big good day!
Two senior executives from the Ombudsman travelled to the ECB’s headquarters in Frankfurt in December to view the letter which the bank is refusing to allow the citizens of Ireland to see.
The decision to carry out an investigation follows a complaint against the ECB of “maladministration” by journalist Gavin Sheridan. The ECB has refused to release the letter dated November 19, 2010, for over a year on the basis that it claims it is not in the “public interest” for Irish citizens to see “candid communications” between the ECB and national authorities.
“Not in the Public Interest’ this is rich coming from an unelected EU official.In short it is a two fingers to democracy and your democratic rights
This letter is marked “secret”, and its publication has been blocked at the highest levels of the ECB.
The ECB’s justifications for not releasing the letter included the following paragraph:
The second letter, dated 19 November 2010, is a strictly confidential communication between the ECB President and the Irish Minister of Finance and concerns measures addressing the extraordinarily severe and difficult situation of the Irish financial sector and their repercussions on the integrity of the euro area monetary policy and the stability of the Irish financial sector.
The content of the letter was alluded to as follows:
The ECB must be in a position to convey pertinent and candid messages to European and national authorities in the manner judged to be the most effective to serve the public interest as regards the fulfilment of its mandate. If required and in the best interest of the public also effective informal and confidential communication must be possible and should not be undermined by the prospect of publicity. In this case, the confidential communication was aimed at discussing measures conducive to protecting the effectiveness and integrity of the ECB’s monetary policy and fostering an environment that ultimately contribute to restoring confidence among investors in the overall solvency and sustainability of the Irish financial sector and markets, which, in turn, is of overriding importance for the smooth conduct of monetary policy.
The Irish public deserve deserve better than this tardy treatment from both the EU and the Irish Government
Politics is dead in the Irish Republic. The Irish parliament, the Dail, is now little more than a rubber stamp for the Troika, the generic name for the European Central Bank, the International Monetary Fund, and the European Union, the three powers to which the country is in hock.
Things are bad. Ireland’s debt to GDP ratio is set to reach 122 percent in 2013, above the 120 percent threshold the IMF considers unsustainable. The total debt of the country, according to an Irish Times report, is €192 billion, four times what it was in 2007, with a projected need to borrow a further €34 billion before 2015.
The fact is that Ireland is technically cash-flow insolvent. The country simply doesn’t have the revenue to fund the day to day running of the state. And the projections are for continued borrowing for years to come, with a hope – it can be little more than a hope –that somehow, miraculously, the economy will return to growth.
But with little or no sign of that desperately needed economic growth, emigration of graduates and the unemployed is about the only welfare relief the country has – and at a terrible economic and demographic cost to the future of the state.
Over the past year, 87,000 people left Ireland for countries far afield such as Australia, Canada, and the UK, countries that are now reaping the benefits of Ireland’s expensive-to-educate graduates and tradesmen.
Yet fascinatingly, as those 87,000 people leave the country to find work abroad, the number of immigrants entering the country was steady at 52,700, with 12,400 of these from non-EU countries.
This glaring anomaly of educated and skilled people leaving because of unemployment, being replaced by typically low-skilled immigrants, is not mentioned by the political class. It is mentioned on the streets of Dublin, often in great anger, but no politician will touch it. Political correctness along with the Troika now rule the Irish state.
So even in the midst of financial Armageddon, the numbers entering the country continue at Celtic Tiger levels. Ireland’s welfare entitlements are still very generous, and on any common-sense view of human nature would attract takers. And that seems to be what’s happening.
In north Dublin, for example, over half the applicants for social housing are from immigrants, with over 43 percent of the total being lone parents. While waiting to be housed, all social housing applicants receive rent allowance, with the result that over half of all residential rents in the country are now paid for by the state, or more accurately by the few remaining tax payers.
This socialist policy of state housing support is a lucrative business. One Dublin landlord received €620,000 last year in rent subsidies. On the back of socialist welfare policies, landlords are building wealthy property portfolios – all paid for by the Irish tax payer.
One local councillor from north Dublin broke the rigidly enforced political correctness by talking about ‘welfare tourism’, but quickly back-pedalled and qualified his remark by repeating the well established liberal mantra of how Ireland ‘needs immigrants.’
So what, if anything, is the Irish government doing about this unsustainable mess, apart from drawing lucrative salaries and gold-plated pensions? The Taoiseach (Prime Minister) Enda Kenny is paid more than David Cameron.
Economically the Troika is in charge, and the recent austerity budget – which imposed a swingeing property tax on householders, many of whom are in negative equity – was designed largely to facilitate repaying the country’s debt. The government doesn’t have much option here. It simply has to do what it is told by the Brussels apparatchiks.
The Irish political class, in effect, are reduced to being managers working for the Troika, and there’s virtually no serious political debate in the country about any alternative, such as leaving the euro and devaluing. All political parties, both left and right, give absolute and unconditional support to the euro project.
As Nigel Farage said on Irish radio a few months ago, Irish politicians are “the good boys of Europe. Brussels says jump and the Irish say how high.”
Such Brussels worship is unique in the EU. In the UK for example, as in France and other EU states, there is some degree of rational opposition to the EU and to the euro single currency, and these issues often split along left and right lines. There’s no such split in the Irish body politic.
But there is one, highly contentious issue where the Irish political class has dug in and taken a stand – Irish corporation tax rate.
Ireland has one of the lowest corporation tax rates in the EU, at 12.5 percent. This makes the Irish Republic a major corporate tax haven, competing with places such as the Cayman Islands. Many large corporations, including Mit Romney’s Bain Capital Private Equity, use Ireland as a corporate base for tax purposes.
There is unanimous support for this beggar-thy-neighbour policy right across the Irish political spectrum – and for good reason. Thanks to its much resented tax haven status, Ireland pulls in large tax revenues that account for an Irish share of global profits hugely disproportionate to the size of the economy.
But the country risks becoming a pariah state over the issue. Many countries in the EU, particularly the French, are furious at Ireland’s tax haven status. They claim companies such as Google use transfer pricing – routing profits from high tax to low tax jurisdictions – that benefits Ireland and takes from the French exchequer.
With such fierce opposition, it’s difficult to see how the Irish can, in the long run, hold out against French demands for change. So even on the issue of setting its own corporation tax rate, it looks like the Irish political class will eventually have to concede to the power of Brussels. When that happens, along with closer political union, many argue there will be little need for an independent Irish parliament.
Vincent Cooper is a freelance writer