United Left has called on Spanish prime minister Mariano Rajoy to ‘stop lying’ and demanded an explanation as to why the citizens are to ‘pay the ransom for a giant property scam’.
The party’s federal coordinator Cayo Lara stated Sunday that the Spanish people would end up paying a debt that ‘wasn’t theirs’ and be forced to sacrifice the welfare state to fund it, despite assurances from the goverment.
Lara’s calls follow a decision Sunday of the 17-nation euro currency area to lend Madrid up to €100bn for its banks that speculated wildly on property in the country and are now bust. Despite assertions by premier Rajoy that there are no strings attached, the deal adds up to €100 billion more onto Spain’s government debt, increasing it by up to 10%, pushing it to over 90% of gross domestic product.
The bail out comes after the right-wing administration in Madrid moved to give its third biggest bank, Bankia, €23.5 billion and agreed to take ownership of the financial institution that has vast ‘toxic’ property portfolios.
Spanish banks at the trough, again
Spanish banks were also among the biggest recipients of a trillion euros in dirt cheap loans that the European Central Bank offered in November 2011 and February this year. Despite this – and thanks to a punishing austerity budget hitting essential services like health and education and sending unemployment sky-rocketing – the economy is in free fall.
The leader of the communist-led party said the Spanish state had absorbed the debts of troubled financial institutions and has now also become their guarantor. He argued that despite the Government’s spin around the deal, the state would increase its debts and deficit and, on average, every Spaniards will have an additional debt of more than 2,000 euros to be paid back through subsequent budget cuts.
Lara also dismissed as a ‘fallacy’ the prime minister’s claim that the €100 billion would help get credit through to households and small and medium sized companies.
‘The banks have been getting loans at 1% interest [from the European Central Bank] and these have not found their way into the productive economy, rather they have been used to speculate,’ he said.
Paying off the French and German banks
The bank ‘recapitalization’ process is a means to ‘pay the debts of the Spanish banks with France, Germany and other countries, but does not benefit the citizens,’ he said.
United Left is demanding a Truth Commission to get to the bottom of Spain’s banking scandal because ‘people want to know what happened, not only so it isn’t repeated, but also to establish the responsibilities of governments, past and present, and the management of financial institutions, Bank of Spain and regulatory bodies such as the [stock market regulator] National Securities Market (CNMV).’
‘Rajoy promised to tell the truth to the Spanish people but he isn’t. He must urgently explain in Parliament why the state is absorbing the debts of the banks, under what conditions and at what cost to citizens,’ he said.
Street protests against the bank bail out kicked off around the country on Sunday and have continued today.