bunch of bankers

Posted: May 20, 2012 in This is the Voice of Lefty Reason

Writing as someone who was stung by the Iceland bank fiasco a couple of years ago the news that Spanish banks have been downgraded and may be in trouble is a tad worrying to say the least.  Eventually got my cash out of Iceland but it was far from trouble and stress free.  Like an enormous set of dominoes the Euro banks seem to be on the verge of toppling, taking down their punters with them.  After the boom of cheap money that was lent to all and sundry on the back of European property booms the inevitable crash has meant banks are scared to lend; we have gone from one hundred per cent plus no-questions asked loans to the current situation where would-be lenders have to save big deposits to secure any sort of advance.  The root of the Spanish ills lie in a property bubble, the high wage rates forced through by Spanish workers and the fact that Spaniards borrowed and spent like it was going out of fashion.  Now it has all come home to roost, youth unemployment in Spain is forty eight per cent and fully twenty five per cent of the workforce are without paid employment; scary stuff.  Easy solutions are difficult even to suggest; bailouts, austerity and public anger will be on the menu.  Greece, Spain, who’s next?  Ireland?  Portugal?  The list of potential economic disaster states is long and growing.  The “one-size-fits-all” nature of the Euro currency means we are all in this together.  As I have said previously European harmonization was to prevent repeats of wars; this time the battles will be fought out on the money markets and stock exchanges rather than the fields of France.

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Comments
  1. SallyM says:

    Better than war definitely, but I do get the feeling that the ‘Euro’ as the source of all ills is a red herring which we need to avoid. It is unsustainable to spend money we do not have, but we have all benefited from this approach in the last years. We are as much guilty of this in the UK as anywhere else. However it is unreasonable to keep squeezing those who are ill equiped to do anything about it – i.e. poor people in Greece rather than tackle structural issues creating inequality throughout Europe; create a fair taxation and collection system in Greece for starters, apparently enquiries on expensive London property from Greece increase when publicity about problems in Greece increase. Here in the UK we need to focus on industries which create real things not just money in the ether and look at our mediocre levels of schooling and opportunity for all in society.

    With regard to the banks, to use the words of FDR, ‘the only thing we have to fear is fear itself’, if too many people disbelieve then a banking system is unworkable as in Iceland, as happened with the Northern Rock and as could happen in Spain and elsewhere. How do we get a sustainable lifestyle which is equitable and stable? Going for unfunded growth or untempered austerity is not the answer.

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