It was two years ago, in June 2010, when Michael Hudson warned about the collapse of the Eurozone, describing the oligarchy, and how power held by few amounts to neo-feudalism. Just like the last century, People and governments chose to ignore the warnings, greedily and foolishly believing that wealth could be theirs. The outcome in the last century was war, but then, this too is a war today , a financial war against working people.
Dr. Michael Hudson
And so we now witness Eurozone crumbling just as Hudson predicted. It was the plan of private banks that the European Central Bank would fail, in a war against labour, industry and governments. The eurozone sovereign debt emergency showed no signs of abating as the Spanish government desperately haggled over the terms of its expected bailout and the European Central Bank refused to ease monetary policy for the currency bloc, despite signs of stricken European economies sinking still deeper into recession.
Danger zone: How debt crisis is making itself felt
Spain A crushing property slump has left the economy on its knees. Losses linked to the real estate debacle are now threatening the banking system – which in turn has raised the prospect of a bailout for Spain as it struggles to prop up its lenders. The crisis took a new turn yesterday when the anti-corruption unit of Spain’s public prosecutor’s office opened an investigation into part-nationalised Bankia, one of the country’s largest lenders.
Germany Profligacy on Europe’s southern fringes may be the proximate cause of the debt crisis but its impact was felt in Germany when Moody’s lowered its credit ratings for six of the country’s banks. The move was “driven by the increased risk of further shocks emanating from the euro area debt crisis”, the agency said, underscoring the vulnerability of the German economy, despite strong exports and low unemployment.
Greece The recent elections failed to deliver a government. The country will go to the polls again later this month – and the result could determine whether it remains in the eurozone. The far Left wants a change in the conditions attached to the Greek bailout – an idea that Germany, for one, is vehemently opposed to. The country, meanwhile, remains in mired in the recession.
Portugal Lisbon has already had to be bailed out. But another rescue could be in prospect, amid surging unemployment. Although Portugal cleared one of the performance reviews under its rescue package earlier this week, its jobless rate of more than 15 per cent is the third highest in the eurozone, after Greece and Spain.
Cyprus With all eyes on Greece and Spain, it is easy to forget about Cyprus, which is racing to save Cyprus Popular Bank. The lender is heavily exposed to Greek bonds – and if investors aren’t willing to supply the €1.8bn needed to shore up the bank, President Dimitris Christofias, below, will have to step in. The fear is that the country will struggle to find the cash (10 per cent of its economy), paving the way for an international bailout.
France Paris is also under pressure to rein in its finances. Analysts fired a warning shot earlier this year, when the country lost its prized AAA credit rating. Now, the focus is on its banks – and their exposure to troubled economies. Yesterday, Moody’s lowered its ratings on the Greek arms of Crédit Agricole and Société Générale, piling further pressure on two of France’s biggest lenders.
And what of the UK?The current UK Government has inflicted on the ordinary people a 2.5% VAT, 1-2% NI increase, the harshest public sector cuts in 60 years, trebling of tuition fees, public sector pay freezes and pension raids, an increase in pension age and so on. (ONS)
Yet the bankers who caused the crash get from Osborne an abolition of the bonus tax, a reduction in business rates, a new law that allows them to avoid taxes on any foreign subsidiaries profits (Barclays and RBS have seven hundred of these tax avoiding vehicles and Barclays for example paid only 1% tax last year). See Guardian comment
Bankers carry on with business as usual and get an average pay increase of 20% last year and a £14 billion bonus. The public get a recession and the biggest drop in living standards in a century.
Thatcher’s policies meant that manufacturing industries in the UK declined. The focus on the financial sector leaves the UK vulnerable to collapse – just as Hudson predicted.
“For UK banks, the average annual subsidy for the top five banks (between 2007 and 2009) was over £50 billion – roughly equal to UK banks’ annual profits prior to the crisis. At the height of the crisis, the subsidy was larger still. For the sample of global banks, the average annual subsidy for the top five banks was just less than £ 60 billion per year. These are not small sums.”
In April, 2012 (6), Tax Research UK reported that the European parliament has officially adopted the policies of the Tax Justice network. The time for action to reclaim wealth stashed away in tax havens is well overdue and until this has been addressed no progress will be made.
1. Guardian Spain calls for Tax Pact to save the Euro
3. Independent: Eurozone divided as time runs out for Spain
4. Estimated cost of Recession , Andrew Haldane