United Left called Tuesday on Spanish MPs to back its proposals to nationalise the country’s ailing banks and create a ‘public bank’ to start digging Spain out of recession.
Alberto Garzón, economic spokesman of the Communist-led coalition, rejected plans to bailout the country’s third largest bank, Bankia, and said it should be taken into public ownership alongside all the other Spanish banks that have received public money, or are in line for a bailout.
He said the employees of the banks should be protected and the social function of the seven savings banks, or Cajas, that were merged to form Bankia two years ago should be maintained, with priority given to extending loans to families, and small and medium sized businesses.
The empty properties whose plummeting values are weighing down the banks would constitute a stock of ‘affordable rental accommodation’, he added.
The last socialist administration gave the banks €110 billion in aid and new right wing government that replaced it in November is planning to offer a similarly sized hand-out this year, according to United Left.
Spanish banks also took €130 billion, or 36% of the €529.5 billion loans offered at a bargain 1% interested rate by the European Central Bank in February. Rather than invest in the Spanish economy, they used about half of these loans to buy government bonds (€67 billion worth) Some estimates suggest Spanish, together with Italian banks (also large takers of ECB loans and buyers of sovereign debt) have made €22 billion in capital gains on their government’s bonds. They are ‘parking’ much of the rest with the European Central Bank.
Governments should stop their timid policies of asking banks to ‘please’ behave, and take decisive action, argued Garzón.
‘The financial system is suffering from the aftermath of the enormous profits made from the housing bubble’and now has to make up the losses. Until now it had done it with financial instruments from the European Central Bank, but now the Popular Party… [plans] to turn the losses of a minority into the losses of the majority, to socialize the losses.’
Garzón slammed the government’s push to ‘dismantle’ the welfare state and pointed out that the €7-10 billion that the Rajoy administration was considering to spend to ‘save’ Bankia was the same amount being slashed from education and health budgets. This hand out would follow €4.5 billion in public funding Bankia received when it was established in 2010.
In announcing the ‘save’ Bankia operation on Monday, the Popular Party government of Mariano Rajoy indicated that it was to break yet another of the promises it made to the electorate during its election campaign last autumn. It had promised no more bank bailouts (the other was no tax rises). This will be the fourth bank bailout – governments prefer to use the word “reform” – in the last three years.
Spain’s banks owe vast sums of money that financial markets are not confident they have any chance of paying back. Exposure to the country’s ailing property market stands at €338 billion, of which €176 billion are potentially ‘toxic’. Caused initially by a housing boom that went bust, the problem just keeps getting worse as increasing numbers of home owners can no longer their mortgages as austerity-fuelled unemployment, now over 24%, keeps rising.
A decision on the Bankia bail out is expected Friday.