EU Leaders Meet. Ordinary Europeans Weep. Bankers Celebrate.
The leaders of EU countries have successfully confronted the Greek Crisis. The crisis of 11 million Greeks being ground down into national penury, their economic futures taken away? Oh, no. Why bother about that? The crisis that EU leaders successfully confronted was the possible lose of a lot of money by banks that had loaned money to Greece.
It was important that this challenge be met because if it weren’t, there could be horrible spin-off crises in places like Ireland, Spain and Italy. Am I referring to the fact that a bank-sponsored real estate bubble that popped is making economic life in Ireland so much more difficult for so many more of its people? That Spain has an unemployment rate of more than 20 percent? That Italian workers and pensioners will have to take crushing hits?
Oh no. Why worry about things like that? The crisis here that EU leaders set about meeting was that banks that loaned money to these countries might have losses far greater than their Greek losses.
By wait, you say. This agreement reached by EU leaders requires banks to take a 50 percent “haircut,” to take voluntary write-offs of 50 percent. Doesn’t that mean that banks are going to share the pain of the tens of millions of citizens whose economic lives will be so severely diminished because of the agreement reached by EU leaders?
Well, not exactly,
Because these voluntary write-offs will only come about after the banks are “recapitalized” to the full extent of their loan losses. The money for this recapitalization will come from European governments in diverse ways, or from new investment, which will come about because EU governments in diverse ways will be guaranteeing investors against losses.
European sock markets soared on the news, rose by as much as 6 percent. Led by bank shares. The Dow in this country rose 3 percent. Led by bank shares. German working people put up the money so huge numbers of their fellow Europeans could experience woeful austerity in order for the banks and richly compensated bankers could once again wax fatter than ever.
Golly. Makes you wonder if maybe all those Occupy Wall Streeters might actually have some good reasons to be protesting.
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