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FMI/UE/BCE: «the heavy mob have arrived to strip assets and load taxpayers with more debt»

Posted: 8 de abr. de 2011 | Publicada por AMC | Etiquetas: , , ,

foto: José Sena Goulão/AFP/Getty

Uma analogia excelente de Michael Burke, ontem, no The Guardian, para explicar aquilo em que, na prática, se traduz a mão estendida do FMI e da UE ao resgate financeiro a Portugal.

In the excellent TV series The Sopranos there is an episode where mobster Tony Soprano tells a small-time gambler why he let him play and lose in the big stakes game. "I knew you could never afford it, but your wife had the sports goods store," he explains after stripping the store of its assets and bankrupting it.
The Sopranos is available in Portuguese. Viewers will find out more about their fate than from most media coverage now Portugal is the latest economy to fall into the clutches of the European commission and, possibly the IMF. It is a mobster's embrace, as Irish and Greek citizens can testify.

The Portuguese government is reportedly requesting an emergency loan of €80bn, following an auction of government bonds where interest rates reached exorbitant levels. However, judging by the experience elsewhere in Europe the interest rate charged by the EU will be no lower than the unsustainable rate demanded by the bond markets.
The Irish and Greek bailouts were billed as an extreme but necessary step to support the solvency of the state. They have failed. Both economies have suffered further downgrades by the international credit ratings' agencies since the bailouts were announced, and financial markets are still pricing in a likely default. The Lisbon government, like those in Dublin and Athens, is likely to find it has exchanged the uncertain and costly financial market debt for the certainty of exorbitant debt from the EU and the IMF. As a result, the state will be less able to repay the debt over the long run, and more immediately it will be less able to sustain the debt servicing costs.
Worse, in exchange for the bailout funds a further set of cuts to public spending and taxes on poor and middle-income earners will be demanded – which throttle economic activity, depressing the tax income on which debt servicing depends. The likelihood is that the deficit will rise and so too will the risk of default. Greek and Irish tax revenues are falling.
There remain persistent reports, publicly denied, that the IMF is urging a Greek partial default on its debt. Whatever their validity, mainstream opinion – in the form of the Economist, the Financial Times and leading economists such as Joseph Stiglitz, Paul Krugman and Kenneth Rogoff – have all urged partial default on either Ireland or Greece simply because the interest burden is unsustainable.
The reason these enormous bailout sums increase the likelihood of a default is because they are Tony Soprano bailouts – not a cent goes the countries themselves, but straight to their creditors, European banks and, increasingly, US hedge funds. It is a repeat of the loathed bank bailouts seen across the world, this time on the international stage. Taxpayers in the so-called "peripheral" economies are bailing out Europe's biggest banks. Britain's banks are also beneficiaries, with nationalised Royal Bank of Scotland at the head of the queue.
"Peripheral" economies is one of the more polite designations identifying the targeted countries. It is said the categorisation is based on debt levels – but that cannot be true. Both Italy and Belgium had higher government debt as a proportion of GDP than all these economies except Greece. Nor is it true that they are all chronically prone to high deficits: Ireland and Spain ran government surpluses before the crisis.
It is actually banking that determines whether the country comes under attack from the concerted efforts of financial markets, ratings agencies, EU and European Central Bank. Data from the Bank for International Settlements shows net assets of the banking sector of Germany, the Benelux countries and France are over $2tn, while the Mediterranean group of countries has net external liabilities of over $400bn. Ireland went from poster-boy for austerity to EU/IMF basket-case only when its banks were clearly insolvent at the end of 2010.
Domestic politicians are also responsible. The crisis hit all countries, but some weathered it much better than others, mainly via increased government spending, which led to economic recovery. But it was the initial weakness of tax revenues that determined the severity of the crisis. A league table of low-tax economies in Europe would have all these countries in the vanguard – Ireland, Estonia, Slovakia, Greece, Spain and Portugal . Their banks/shipping, companies/property speculators gambled and lost. Now the heavy mob have arrived to strip assets and load taxpayers with more debt. As Tony S says, "watchyagonnado?"

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