Pundits and Brussels officials are reported to believe that, following a deep write-down of dodgy housing loans, a tonne of cash from the eurozone’s rescue fund – the €500bn European Stability Mechanism – is required to shore up the country’s financial sector. Why?
A fresh panic is on that unlike Ireland, where housing prices have fallen drastically since the start of the crisis, Spanish property has only just begun to see a sharp price decline. This raises concerns banks could face an Irish-style bottomless pit of bad loans (currently at an 18 year high of €140 billion) that could ‘rattle investor confidence’. If this were to happen, the government would then need to step in to save the banking system, taking on huge liabilities, and this would in turn lead to a sovereign debt default.
It doesn’t feature much in the mainstream media, for which a fresh injection of zillions of citizens’ euros appears acceptable, but it was bankers’ gambling on the property casino that created the bubble that first burst in 2007, sending the economy into meltdown.
This obsession with bricks and mortar has not only done lasting damage to the environment in large parts of Spain’s coastal regions, but it has created a massively lopsided economy as investment that would otherwise be available for other sectors has been ‘crowded out’. And that’s not to mention the millions who are up to their necks in debt or out on the streets after their homes have been repossessed and whose misery is fuelling a downward spiral of unemployment and recession.
The country’s banks haven’t spent all their money on property, to be sure. Another activity in which the Spanish banks have been busily channelling cash is the war industry, a new report out this week has revealed.
A report by Centre d’Estudis per la Pau J.M.Delàs – Justícia i Pau shows BVA, with €1.8 billion, and Santander with €1 billion, were the biggest war financiers. In all, 60 odd Spanish financial institutions are in partnership with the global military industrial complex, forking out via debt issuance, shareholdings, loans and export credits, among other methods of financing, €45 billion for weapons of death.
That’s about 40% of the total €110 billion the country’s banks have received from 2008 to date from the public purse. And it is about £5 billion shy of the sums being talked about in term of a fresh injection from the ESM – funded by governments and therefore, ultimately ordinary folk.
Furthermore, banks’ €45 billion war budget is of the order of public spending cuts planned by prime minister Mariano Rajoy this year, cuts that will shred basic services like health and education and, as a number of observers have predicted, could very likely send the Spanish economy into a Japanese style ‘lost decade’ of economic stagnation.
Whether its funding death and destruction around the globe, or provoking economic execution at home, Spanish banks can’t show they have made any positive contribution to anybody apart from the net wealth of their owners and top executives.
Spanish banks have been central to all that as wrong with Spain today. If there’s €50 billion odd to spare then its pretty clear it surely shouldn’t be given to them.