After months of denials and prevarications, the Spanish government has finally done what many economists have been predicted it would have to do for months, and asked for a 100 billion-euro bailout for its sieve-like and utterly corrupt banking system.
Mariano Rajoy has tried to put an altruistic gloss on this belated decision – or is it simply blackmail? – by claiming that the bailout is necessary not just for Spain, but in order to save the euro from collapse.
Whether it will be able to do this remains to be seen. It is far from clear whether 100 billion will even be enough to rescue Spain itself from the disastrous consequences of cronyism, mismanagement and nepotism with which its major banks were run for so many years, and which neither Socialist nor rightwing governments did anything to prevent.
Throughout Spain’s boom years, its banks poured vast sums of money into dubious infrastructure projects which they failed to evaluate, and which were often linked to nepotistic political arrangements with local politicians.
Take Bankia, which the Spanish government finally agreed to recapitalize last month after it was revealed that the bank had accumulated an eye-watering €19bn worth of debts. This decision was taken after Bankia’s parent company BFA reported a €3.3bn loss for 2011 – one hundred times larger than it had previously stated – and wiped out two thirds of investments from 350,000 small investors.
You might not think that an institution responsible for such an outcome should be rewarded, but as we have seen in many countries, the financial sector is not subject to the same rules that are applied, for example, to the ‘bloated’ public sector.
So we shouldn’t be surprised that Aurelio Izquierdo, a senior executive at the bank, received a €14m final payoff that same month. Or that Matías Amat, another Bankia executive who received a €6.2m payout in exchange for taking early retirement at the age of 58 last September.
For this is how things work in the early 21st century. Writing in the Guardian last week, Giles Tremlett painted a grim and almost surreal picture of a Spanish banking culture in which
Boards were stuffed with political placements or people who had little idea about banking – including, in one case, a supermarket checkout worker. They often rubber-stamped decisions. In some cajas they were rewarded with well-paid positions on the boards of subsidiary companies as well as with luxury foreign trips and soft loans.
Trips to India, China or Chicago and the hundreds of millions of euros in loans to executives, board members and their families formed part of the gravy train of political favouritism and cronyism.
Now millions of Spaniards who had nothing to do with this disaster face years of economic misery, in which mass unemployment is coupled with budget cuts and government-induced ‘austerity’ that will see essential public services stripped to the bone.
Needless to say, this outcome is not unique to Spain. Across the continent public services are being sold off and/or shut down in the name of deficit reduction, with the fervent approval of the IMF and the EU, while banks and financial institutions receive bailouts according to the unwritten principle that profits should be privatised and losses are to be socialised and paid for by the public.
This principle is not generally applied to the rest of society and has been generally absent in the neo-liberal/structural adjustment policies that have dominated the global economy for the last forty years. But the seemingly anomalous reversal in the natural (capitalist) order of things cannot be attributed to ’too big to fail’ economic pragmatism, or governments seeking to make the best of a bad situation in order to keep the ATMs from shutting down.
On the contrary, on both sides of the Atlantic the 2008 crisis has become a catalyst and a pretext for driving down the wages and living standards of the majority and privatising public services – with few concomitant checks to ensure that a similar crisis doesn’t happen again.
The transformation of a crisis in the banking sector into the mantra that ‘we have all been living above our means’ may go down as one of the greatest political con-tricks in history. Like illusionists at a magic show, governments, the IMF, the European Commission and the banks themselves have all colluded in this deception, and Spain is just one more variant on this theme.
As a teenaged delivery boy in Madrid declared yesterday, ’I don’t really understand it, but I get the feeling some people have lived liked kings, And we’ve all been idiots.’
Which just about sums it up.