ECB at the service of private interests

By Odalys Padrón*

Europe has a long democratic tradition. Athens in the VII to V centuries B.C., evolved from an oligarchy, rule by the few, to a democracy, government by the people. This achievement was brought about by the people through countless popular rebellions. It was not a full democracy, since slavery endured and women were not allowed to participate in politics, but it was a start. Democracy was reborn during the Enlightenment in the eighteenth century with the foundation of representative democracy.

For Espinosa, the philosopher of Amsterdam, the protection and guarantee of the rights of people are the main cause of the creation of the state. He defended the right of individual conscience to think and freedom of expression. According to Espinosa democracy is the most natural government, being the closest to the freedom that nature gives us all. His contemporary, the British Locke, advocated the principle of division and separation of powers as the only way to limit the power of the state and guarantee freedom. The guarantee of intrinsic rights, like life, liberty, property and the right to compensation in case of offense or damage, enshrined in the social contract by which we yield parts of our rights to confer them to the political organization of society: the state.

French Montesquieu also established the division of powers as the appropriate institutional framework to enable the existence and maintenance of freedom that cannot be left to the mercy of the people or its government, since some people are more or less virtuous and well-meaning than others. In this way, the development and strengthening freedom would be safeguarded without relying on chance and the virtues held by the men who constitute the government. Freedom must be institutionally protected especially in the event that the rulers are evil, or if the people are corrupted.

And so it is with this background we look upon with shock, disgust and outrage the sorry spectacle of anti-democratic institutions that make up the European Union. Institutions, which mostly represent the interests of large financial companies neglecting the interests of citizens. Examples of these institutions would be the European Central Bank, the European Commission, the European Council and even the European Parliament.

How can you talk about democracy when they try to impose the TTIP, the Treaty Transatlantic Trade and Investment, without providing us any information? These are repressive and abusive practices that we thought we had banished. A TTIP that favours big business and will enable a massive loss of rights that with so much effort, blood and tears, were consolidated and now they want to take them away in a premedited fashion, and without anaesthetic. It intends to reduce food standards, end the rights of citizenship, bend governments by limiting their legislative capacity, and there is also pressure to delete the clause, which Europe has in place to prevent any article going on the market without first having shown that it is not harmful; instead the Americans want to the product to go to market first and then later deal with whether it is harmful.

Every day more data confirm that the EU was created by and for financial elites. Timidly appearing in some media outlets, it has been revealed that the European Central Bank (ECB) gave 470 million euros of support to Telefonica, Iberdrola and Repsol. Other companies that have received aid include Gas Natural, Red Electrica, Enagas, ABERTIS, Maphre, Redexis, Siemens, Renault or Anheuser-Busch.

While the financial elites are favoured by the ECB, Member States, under by Article 104 of the Maastricht Treaty and Article 123 of the Treaty on the Functioning of the European Union, cannot be funded directly by the European Central Bank but instead pay private banking, in interest, more than 350,000 million euros annually. Some economists show that if the Spanish state, since 1989, had been funded at an interest rate of 1% from the central bank, Spanish public debt would now be at 15% of GDP, and not the 100% it is today. [ECB benchmark refinancing rate averaged 2.20 percent from 1998 until 2016, less than 1% since 2009 and currently at zero]

The conclusion is clear: ECB finances large companies while prohibiting direct financing to states and government, claiming that politicians squander handfuls that could further indebt their citizens and would lead to a suspension of payments with effects far worse than those seen today. Curious, they do not trust politicians (in some cases I could understand it) but trust top managers of large companies 70% of whom, according to a survey by consulting firm EY (formerly Ernst & Young), consider “bribery and corruption “common’, a usual practice to generate profits. In addition the survey reveals that 56% of executives surveyed recognize the existence of “cooking the books ” in financial reporting of large companies.

This pro-enterprise “philosophy” should not be unknown to the President of the ECB, Mario Draghi. He was formerly Vice President for Europe of Goldman Sachs, one of the companies involved in the financial crisis because of its relationship with junk mortgages and selling linked to these products. The firm that was linked to the Greece’s dodgy public accounts in which data on the deficit and debt was hidden and which allowed Greece into the euro while the US bank walked off with a bonus of 600 million euros.

Given the history of the President of the ECB, it is not surprising to see the claim that the withdrawal of 500 euro note is not because they are used for criminal activities. Tax inspectors do not believe that this measure will not stop fraud or money laundering. It could be related, as noted by some economic journalists, that with the possibility of negative interest rates many people will be encouraged to take their money out of the bank and save cash in order to protect their savings. This would add pressure on financial institutions and the elimination of 500 notes hinder this option, for space reasons. As we said, the financial elites favour hurting the working class. The public at the service of private interests.

*First Secretary of Socialist Alternative, a socialist republican and anti-neoliberal party founded as a split from PSOE

El Publico

Translation by Revolting Europe