FacebookTwitterGoogle+RedditEmail

The Coming of EuroTARP

The Bundestag will have one chance to stop Angela Merkel’s plan to provide hundreds of billions of dollars to underwater EU banks that made bad bets on sovereign bonds. If the German parliament fails to block Merkel on September 23,  then–under the “expanded powers” of the European Financial Security Facility (EFSF)– insolvent banks will be bailed out and the costs will be passed on to eurozone taxpayers.

Despite her populist bloviating (“We won’t be bullied by the markets”), Merkel is a devout Europhile committed to a fiscal union ruled by bankers and bondholders, a Banktatorship. Presently, she is doing whatever she can to hurry the process along before hostile bond vigilantes roil the markets and bring the EU banking system crashing down. This is from Der Spiegel:

 “In a situation of market panic, the EFSF has to act quickly,” Holger Schmieding, chief economist of Berenberg Bank, told the Financial Times Deutschland. “It could happen overnight or on a weekend.” Guntram Wolff of the Brussels-based think tank Bruegel agreed. Parliamentary approval “must not take too long.” (“Parliamentary Influence over Euro Bailouts Naive'”, Der Spiegel)

Sound familiar? US Treasury Secretary Henry Paulson used the same strategy after Lehman Brothers collapsed in 2008 in order to blackmail congress out of $800 billion via the TARP bailout. Once again, the fear of a financial meltdown is being invoked to stealthily extort money from working people.  Here’s a clip from another article in Der Spiegel:

“The banks are in fact in a bad way. Most of them still have a lot of Spanish, Italian, Portuguese and Irish sovereign bonds on their balance sheets, and it is not entirely clear whether these will ultimately be repaid in full. That in turn is fueling distrust among the financial institutions themselves and many have stopped lending each other money. They are only being kept alive because the European Central Bank (ECB) is making an unlimited amount of money available to them and are accepting securities as collateral that many investors no longer consider to be safe.

“Better capitalization for the banks could alleviate this mistrust, because more equity means that the banks could better absorb losses from their sovereign debt business. Those institutions that are not strong enough to raise the money themselves on the capital market would have to be helped out with public money. There is hardly an institution that is better suited for that job than the EFSF.” (“The Euro Rescue Fund Needs More Powers”, Der Speigel)

This excerpt is wrong in so many ways, it’s hard to know where to begin. The EFSF was set up to prevent nations from defaulting, not banks. The idea that bond speculators can be compared to representative governments is laughable. The banks are in trouble because they made poor decisions and now must face painful haircuts on their investments. Shareholders will be wiped out and debts will have to be restructured. It’s not the end of the world.

What Merkel and Co. want to do is turn the system on its head and transform the EFSF into a permanent off-balance sheet SPV (Special Purpose Vehicle) authorized to distribute public money to failing banks. And it’s all being done to keep their sketchy banker friends from losing money. So, behind all the baloney about “fiscal unity” and “consolidation of state finances”, lurks the ugly truth that the eurozone is a two-tiered system whose financial architecture is identical to Enron. There’s nothing democratic about a system that rewards profligate elites while shunting the losses off onto workers. That’s just plain old kleptocracy.

The German Chancellor is joined in her struggle by colleagues at the ECB and the IMF. In fact, newly-appointed IMF chief, Christine Lagarde, is leading the charge for Euro-TARP, which may explain why  she was rushed through the nomination process after Dominique Strauss Kahn stepped down pending his investigation on rape charges in New York.

In any event, Madame Lagarde has already shown that she’s more than willing to do whatever heavy-lifting is required to achieve her objectives and to accommodate her wealthy constituents. . Here’s how The Guardian summed up Lagarde’s resume: “Christine Lagarde stands for protecting big banks…..she’s the most pro-bank bailout of the lot.” (“IMF under growing pressure to appoint non-European head”, The Guardian)

Indeed. So, Lagarde has thrown her weight behind the bank bailouts, aka bank recapitalization. Also she is a  fierce advocate of “institutionalizing a European economic government”, which means that she wants to establish a regime that is controlled by bankers and bondholders; Banktopia. At the same time, she insists that this new governing body have the power to intervene in the budgetary process of the eurozone sovereigns to “maintain our efforts to expand the scope of economic surveillance to include government deficits and public as well as private-sector debt, if necessary by imposing “political penalties”.

Right. So, this new trans-EU government will be able to crack the whip on errant states that pass budgets that serve the interests of their people rather than those big capital. Meanwhile, Lagarde’s EU Superstate will continue to impose the same policies it has since the onset of the financial crisis; large-scale privatization of state assets and services, and belt-tightening programs that keep the economy in a permanent state of Depression. Is this what’s in store for the Eurozone?

Keep in mind, the banks are already getting bailed out through the ECB’s bond purchasing program that keeps bond prices artificially high and averts a sovereign default. The fact that Lagarde is aggressively pushing for direct injections of capital, suggests that the condition of the banks is far worse than anyone had figured, which is why–according to the Wall Street Journal–“She suggested that the EU’s existing sovereign bailout fund  (ESFS) could be used for this purpose.” It’s a classic example of bait and switch.

German parliamentarians have a chance to put an end to this nonsense once and for all. By blocking Merkel, the Bundestag can ensure that the eurozone’s working people will not be ripped off for hundreds of billions of dollars or subjected to the autocratic rule of parasidic banksters . Let the banks pay their own bills.

No to EuroTARP!

Mike Whitney lives in Washington state. He can be reached at fergiewhitney@msn.com

 

More articles by:

MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.

Weekend Edition
August 17, 2018
Friday - Sunday
Daniel Wolff
The Aretha Dialogue
Nick Pemberton
Donald Trump and the Rise of Patriotism 
Joseph Natoli
First Amendment Rights and the Court of Popular Opinion
Andrew Levine
Midterms 2018: What’s There to Hope For?
Jeffrey St. Clair
Roaming Charges: Running Out of Fools
Ajamu Baraka
Opposing Bipartisan Warmongering is Defending Human Rights of the Poor and Working Class
Paul Street
Corporate Media: the Enemy of the People
David Macaray
Trump and the Sex Tape
CJ Hopkins
Where Have All the Nazis Gone?
Daniel Falcone
The Future of NATO: an Interview With Richard Falk
Robert Hunziker
Hothouse Earth
Cesar Chelala
The Historic Responsibility of the Catholic Church
Ron Jacobs
The Barbarism of US Immigration Policy
Kenneth Surin
In Shanghai
William Camacaro - Frederick B. Mills
The Military Option Against Venezuela in the “Year of the Americas”
Nancy Kurshan
The Whole World Was Watching: Chicago ’68, Revisited
Robert Fantina
Yemeni and Palestinian Children
Alexandra Isfahani-Hammond
Orcas and Other-Than-Human Grief
Shoshana Fine – Thomas Lindemann
Migrants Deaths: European Democracies and the Right to Not Protect?
Paul Edwards
Totally Irrusianal
Thomas Knapp
Murphy’s Law: Big Tech Must Serve as Censorship Subcontractors
Mark Ashwill
More Demons Unleashed After Fulbright University Vietnam Official Drops Rhetorical Bombshells
Ralph Nader
Going Fundamental Eludes Congressional Progressives
Hans-Armin Ohlmann
My Longest Day: How World War II Ended for My Family
Matthew Funke
The Nordic Countries Aren’t Socialist
Daniel Warner
Tiger Woods, Donald Trump and Crime and Punishment
Dave Lindorff
Mainstream Media Hypocrisy on Display
Jeff Cohen
Democrats Gather in Chicago: Elite Party or Party of the People?
Victor Grossman
Stand Up With New Hope in Germany?
Christopher Brauchli
A Family Affair
Jill Richardson
Profiting From Poison
Patrick Bobilin
Moving the Margins
Alison Barros
Dear White American
Celia Bottger
If Ireland Can Reject Fossil Fuels, Your Town Can Too
Ian Scott Horst
Less Voting, More Revolution
Peter Certo
Trump Snubbed McCain, Then the Media Snubbed the Rest of Us
Dan Ritzman
Drilling ANWR: One of Our Last Links to the Wild World is in Danger
Brandon Do
The World and Palestine, Palestine and the World
Chris Wright
An Updated and Improved Marxism
Daryan Rezazad
Iran and the Doomsday Machine
Patrick Bond
Africa’s Pioneering Marxist Political Economist, Samir Amin (1931-2018)
Louis Proyect
Memoir From the Underground
Binoy Kampmark
Meaningless Titles and Liveable Cities: Melbourne Loses to Vienna
Andrew Stewart
Blackkklansman: Spike Lee Delivers a Masterpiece
Elizabeth Lennard
Alan Chadwick in the Budding Grove: Story Summary for a Documentary Film
FacebookTwitterGoogle+RedditEmail