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Italy, Spain

Usual suspects still having an good crisis

Companies are piling up their cash while millions languish on the dole; the rich enjoy tax largesse to be paid for by more cuts to public services: the latest figures from Italy and Spain remind us who is winning and losing in the  neo-liberal austerity crisis.

While we hear of a serious credit crisis and the tsunami of the economic crisis is even preying on healthy companies, it turns out that large non-financial groups are not short at all.

In fact they are accumulating a serious amount of cash, about 30% more’ than at the beginning of the recession. European companies have cash to the tune of about €500 billion, those in the U.S. for about 1.4 trillion dollars, according to a study of 437 large enterprises, excluding banks, insurers and investment funds by the University of Carefin’ Bocconi and Goldman Sachs.

This huge investment strike by capital, of course, won’t help en economic recovery or the lives of Europe’s 27 million jobless. Nor will the ever expanding reach of financial capital, the sector of capitalism which provided the fuse that set the powder keg alight in 2008, got a huge transfusion courtesy of the taxpayer and that is showing every sign of returning back to the bad old ways.

During the first quarter of the year, in Italy the total real estate assets managed by investment funds exceeded 50 billion euros; in the 15 years since the industry began in Europe’s fourth largest economy assets have grown 16-fold, the largest expansion on the Continent, after Luxembourg. Then there’s sectors like insurance that have invested in government bonds to the tune of 270 billion euros and corporate bonds amounting to 90 billion.

Small guys losers

But at the other end of the scale its a sorry tale.  Ninety-four per cent of the businesses that folded in the six years of the crisis were small craft enterprises, according to the Confederazione Nazionale dell’Artigianato e della Piccola e Media Impresa. And over this period only 93,000 new companies have been created, the lowest number ever. Employment levels in small firms have dropped by 11.5% to 1.35 million, compared to an overall national decrease in employment of 6.7%.

So, the crisis is enriching the usual suspects and hurting others. As the Bank of Italy recently confirmed, Italy’s richest 10% of households have grabbed even more of the nation’s wealth – now as high as 46.6%, up from 45.7% in 2010.

Over in Spain the picture is little different. The bursting of the housing bubble, the ensuing recession and the collapse of markets meant even Big Money lost a few euros. However, things have now turned around for the super-ricos.

Take SICAVs – the investment vehicles of choice for the super wealthy. The value of SICAV assets rose to EUR 27.6 billion by December and EUR 28.8 billion by the end of the first quarter. At this rate, the SICAV portfolios of los superricos will be back to their 2007 historic highs of EUR 31.5 billion by the end of the year.

One reason for the recovery in SICAVs appears to an influx of funds as initial fears of tax hikes by the right wing government of Mariano Rajoy proved unfounded. Another is a tax amnesty that fell well short of its objectives in terms of boosting government revenues but was good to fat cats who have now returned money they’d squirrelled away overseas for another avoidance scam.

Big guys dodgers 

For SICAVs are one big dodge: they are supposed to encourage people to club together to invest, attracting super low tax rates on the condition that a fund had a minimum of 100 shareholders. However it is suspected that behind many of these funds is really just one disgustingly wealthy individual, with the other 99 dummy shareholders doing their bidding.

Happily for the 1%, the government of Mariano Rajoy in Madrid is unashamedly on their side. The right-wing Popular Party is cutting taxes – the top rate of income-tax rate will be reduced to 47% from 52% and the main corporate tax rate will drop to 28% next year and then to 25%.

For the 30 top earning executives at stock market listed companies this means an extra 8 million euros in their pockets, or 270,000 euros each on average. Among the blessed are Amancio Ortega of Inditex (holding company of retailer Zara), Emilio Botín of Banco Santander (Spain’s largest bank) and another banker, Francisco González of BBVA.

There will also be tax cuts for the lower paid and on average tax payers – excluding of course the millions who legitimately don’t pay tax because they are on the dole – will see a rather more modest but nonetheless welcome extra 270 euros in their pockets.

Wages keep falling

But this will come at a cost to the average Juan, who continues to see his wages continue to fall, first quarter data shows: indeed wages have fallen so far that the proportion of workers forced to get by on the minimum wage is now at an eight year high).

The income tax give away alone will blow a 4.8 billion euro hole in the public finances, to be paid for no doubt by further cuts in what was once described as the ‘social wage’. Spending on things like schools, hospitals and other parts of the welfare system that have seen thousands of jobs slashed and services cut or rationed in recent years. Services the elite never use.

The winners are always the same.

Sources include: controlacrisi  El Publico

About revoltingeurope

Writer on Europe's Left, trade union and social movements @tomgilltweets or @revoltingeurope


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