French bankers were second only to their German counterparts in the Eurozone as beneficiaries of public handouts to save them in the wake of the banking crisis, a crisis they caused.
Now, 10 years on from receiving the mega government cheque, they are pedalling the myth the whole saga was costless; that the French people didn’t ended up spending a cent.
Earlier this month, BNP Paribas chairman Baudouin Prot said on TV that the French state has made money from the rescue of French banks in 2008-9. If there’s trouble with the public finances, looks elsewhere, was the implied message.
This line was already set out detail three years ago by the French Banking Federation Prot used to lead. It claimed that France ‘was one of the few countries in the Eurozone where the crisis had no significant impact on the deficit and public debt.’
On top of getting back the principal, the French state profited from 2.3 billion euros in interest payments, it said. The leap in public debt by 31% of GDP between the period 2008- 2014 that is still weighing down the country was unconnected to the support given to French banks.
Looked at it one way it is true that – in sharp contrast with Spain – France did not lose out from direct aid it gave to French banks. But only if you from the calculation the public take-over of Franco-Belgian Dexia, at a cost of 6 billion euros and 1.2 billion euros of toxic loans made to local authorities from private banks pedalling high risk financial products (a financial millstone that will continue to weight on local government finances for years to come).
The figures also exclude ”rescue” funds from Paris to Athens – France’s considerable share of a 260 billion euro EU/IMF package which was in fact used to ‘rescue” French, as well as German banks, who had recklessly loaned vast amounts to Greece and its banks.
The cost to the French taxpayer that French banks prefer not to talk about doesn’t stop there though. Cutbacks in public spending across the Eurozone to fund bank rescues led to six consecutive quarters of economic contraction between the end of 2011 and start of 2013, the longest downturn in the postwar history. This in turn led to a sharp fall in tax revenues and increase in welfare payments connected to unemployment.
And it wasn’t as if French banks were innocent victims of the 2007-8 banking crisis. If the sub-prime crisis started in the United States, it wouldn’t have had the catastrophic impact it had without the trillion dollars invested by EU banks in US treasuries, in effect propping up this colossal pyramid scheme until its failure would be systemic; indeed at the time European banks constituted a “global speculative fund”, historian Allen Lane argued in his book, ‘Crashed’.
And it should be noted that it was Prot’s very own BNP Paribas, France’s largest bank, that internationalised a crisis born in the USA, by suspending withdrawals and investments in three different funds.
But that’s not the sum of the the French banks’ liabilities to the French state.
While French banks focussed on getting their houses in order, they slashed loans to the real economy. This forced the French state to step in. Which lead to a rise in the deficit to 7.5% of GDP in 2009.
The losses to the state due to economic contraction amounted to 1.5 trillion euros, according to a study by one study, by Eric Dor, director of economic research at IESEF School of Management, University of Lille. And while initially it was the state that absorbed the costs of the banking crisis, from 2012 households started feeling the pinch as government spending was reigned back following its largess to banks in the previous four years.
The combined impact on French people’s income of welfare cuts and other austerity measures, unemployment and wage restraint, totalled 763 billion euros between 2008 and 2017, Dor further calculated.
He also looked at the knock on impact of all this on the public debt – it amounted to 8.5% of GDP. So if the economy has been growing at the trend it had before 2008, public debt would have stood at 90% of GDP, rather than today’s 98.5%; the deficit would have been 2.45% not 2.7%. But these calculations don’t take into account the virtuous interplay between growth, tax receipts, public spending and debt; France’s public finance health would have been much stronger now.
All of this matters because banks – above all French banks – have successively dodged any reforms (despite a socialist President Francois Hollande having 5 years from 2012-17 to implement them) that would avoid a repeat of the behaviour that for which working people are continuing to pay. Such reforms include breaking up behemoths like BNP Paribas, now the world’s fourth largest, so they are not ‘too big to fail’.
Today French bankers – once again raking it in, with BNP Paribas boss Jean-Laurent Bonnafé earning 9.6 million euros in 2016 – are as arrogant as ever. (They’ve even have one of their own – former Rothschild employee Emmanuel Macron – in the Elysee Palace). They claim the moral high ground, falsely blaming the French state for mis-management of the public finances when it is they who are the culprits.. And so on top of the continuing austerity pain today to pay for banks’ past sins, come the next banking-led crisis, French people will asked to pay some more.
Sources include Mediapart.com