Of the €400 billion plus in rescue funds loaned to Greece all but €15 billion went to assist the banks. Almost all of what was received by the banks was recirculated to the sovereign coffers. The emergency loan pledged to Spain of up to €120 billion is earmarked to aid the banks who, in turn, will re-lend most of it to the Spanish government. The same will hold for Italy and the myriad of nations both within and outside the Eurozone including the internal fiddling of the U.S. Fed.
The only notable conclusion of yesterday’s EU marathon was that, rather than keeping the loans to Spain as senior to the banks, their shareholders, bondholders, and managements, the loans would now become pari-pasu with those of the banking interests. This, in effect, transfers the risk of the euro aid from those who receive it to those who give it, the taxpayers of the lending nations. My, how the world has learned from years of US Federal Reserve behavior. It is now de rigueur to sanctify the banks while devastating the taxpayer. Yes, it is true, the world needs an operating financial system to function commercially and otherwise. It does not need taxpayers and depositors to finance and guarantee speculative roulette – wheel behavior. The banking system is integral to our society but it is not the only factor that keeps the society functioning. Yet, globally the banks have received more than 95% of all funds meant to save and turn around the current economic crisis. A better balance is needed – a much better one, if we are to survive and grow from the current crisis.
The only tangible result of yesterday’s EU conference was to have transferred the risk of Spain’s bailout from the bailed out banks to the bailers – the taxpayers. Not exactly a heroic stand nor of much consequence, except morally.