Banking crisis: Everyone has been lying
12 June 2012
Jornal de Negócios
Banks and politicians are complicit in the banking disaster bank in Spain – and citizens will have to pay for the consequences. It’s a disgrace, angrily writes the director of Portugal’s Jornal de Negócios.
The disaster of the Spanish banking sector shames the state. What brought it on was myth-building. The complicity between public and private in what amounts to a crime. The past profits earned by some, well out of proportion to the harm done to others. It was brought on by denials, by contagion, by lies. Everyone is lying. Everyone is lying to the same listeners: to the taxpayer…. Pardon: to the people.
Today we have the right to whisper about what happens behind other people’s curtains. The house, after all, is mortgaged – and we, the “Europeans”, are the ones who will pay for it. What difference is there, basically, between Greece, which lied about its public accounts, and Spanish banks, which lied about their balance sheets?
The Spanish problem resembles that of Ireland, in that it is a banking crisis, more closely than it does that of Portugal. In Portugal, none of the ten possible problems are crushing – but the country has all of them at once. In Spain the evil comes from an incestuous relationship between cajas de ahorro [savings banks] and regional political institutions, coupled with a housing bubble in which everyone had a hand – and from which everyone benefited: the banks from the loans, the building sector from the construction boom, real estate dealers through the buying and selling, the state through taxes, the parties – we know how they benefited – and the government from the growth in the GDP statistics.
The housing bubble and its effect have been plain to see for just under two years. But Spain has done everything wrong – the previous Zapatero government by putting off dealing with the issue, and the Rajoy government by swiftly losing its determination.
Mergers, disappearances, branch closures
The evil, which could have been confined to the savings banks, now risks spreading to the bigger Spanish banks (Santander, BBVA and La Caixa will not benefit from EUR 100 billion [expected from the assistance plan]). Worse, the contagion threatens the sovereign debt.
The difference between Spain and Ireland lies in the solution chosen. Ireland has nationalised the damage done by the banks by turning the banks’ debts into public debt; in Spain, an attempt is being made to throw up a security cordon around the banking sector by lending €100 billion that will become public debt. With one objective: to prevent the problem of banks becoming a problem of the state.
But it is clear that these 100 billion euros are part of a Spanish bailout. And they include an austerity program, admittedly tacit, yet already on the way. And that program will place Spanish banks under the supervision of the European Central Bank.
The Bank of Spain is very far from having emerged from this affair. So much so that the Rajoy government has disavowed it, by transferring the audit of the system to the Ministry of the Economy.
European banks will earn less money that they used to; they will see mergers, disappearances, branch closures, fewer staff, less debt, fewer assets, and shrunken balance sheets. We in Portugal should know, because we are ahead of them here.
We have already said everything
Some words, indeed, on Portugal: a good student has reason to smile. The capitalisation process is coming to its end, and banks will start off the summer with equity unmatched elsewhere in Europe. It should be noted that some of it is public, some private – but this is an accounting issue that deserves another editorial.
“How do we put some of the blame game behind us?" asked Bob Diamond, president of Barclays Bank, a year and a half ago. The question is premature. When we say that the banking sector has taken politics hostage, that's what we’re talking about: republics of debtors and monarchies of creditors. Financiers who know everything and who bamboozle the politicians, who know nothing.
And both have the supreme audacity to treat those who end up paying for their mistakes as financial illiterates. Yes, those who have tunnelled out the budgets of the future, who garb themselves in austerity and drive up bankruptcies and the unemployment rolls are the same ones who accuse the rest of us of financial ignorance. Bravo.
The crisis is a banking crisis that has metastasized into a sovereign debt crisis. And it is the "Europeans" who are suffering from these crises. That’s us. Democracy must be sick: lying to the European institutions, as was the case in Greece, is ultimately more serious than lying to the people, as is the case in Spain. The banks will be bailed.
And we, what will we tell them? Nothing. We have already said everything. We wrote everything there was to write. There is nothing more to do but to suffer. How does one climb out of the abyss?
Translated from the Portuguese by Julie Marcot