Wednesday, 12 October 2011

Anomie Watch: EFSF and bailout lawlessness

Anomie literally means lawlessness. Although banks are burdened with many, many rules, they are seldom obeyed and largely unenforceable against the most powerful. Central banks are even more likely to ignore their enabling statutes and applicable regulations in innovating "financial stability" solutions. It is this lawlessness that was brought to the fore this week by a vote to reject the EFSF in Slovakia.

My post earlier this week coincided with a furore in Slovakia over approval of the European Financial Stability Facility. The EFSF is yet another mechanism for ill-transparently transferring taxpayer funds via governments and central banks to bankers, bondholders and bank shareholders.

An obscure leader, Richard Sulik, of an obscure minority party, SaS, objected to impoverishing his already poor countrymen to enrich foreign bankers. Under the terms of EFSF financing, taxpayers in Slovakia - the second poorest nation in the EU - would bear a disproportionate share of the EFSF burden relative to the size of the economy.

When the prime minister made support for the EFSF a vote of confidence, Sulik and his party brought down the government. The EFSF is likely to pass following a reorganisation of the coalition government, but in the meanwhile we have a teaching moment of real value.

I respect any politician who acts out of principle rather than self interest. Since the occurence is relatively rare, I was prompted to take a closer look at Mr Richard Sulik and his views on the EFSF. Fortunately he has documented his objections fully in a paper available online:

European Financial Stability Facility: A Road to Socialism

Just like it is impossible to extinguish fire with a fan, it is equally impossible to solve the debt crisis with new debts. The only thing that will help is to face the truth. Greece must declare bankruptcy, Italy must start saving and the rules set up by the eurozone upon its establishment must finally start being observed. It will hurt, but it is the only solution. . .

I would like to point out that this is not the same eurozone we entered in 2009. There are rules that should have been observed but all of them have been violated. Temporary EFSF and permanent EFSF will cost us 1 to 1.5 the amount of our annual state budget! Moreover, there is no guarantee that the attempts for the EFSF increase are over. . . .

EFSF ratification by the National Council will be a decision that will harm the citizens of Slovakia in the long run and to a great extent.

SaS will simply not sign up for something like this.

Whether you are for or against the EU, for or against the Eurozone, for or against bailouts, this is an important document to read. It catalogues the lawlessness and lack of accountability that made a bad financial crisis into a bad banking crisis then worse sovereign debt crisis and an even worse currency crisis.

I wish Mr Sulik had a career ahead of him in central banking or EU public policy. I fear after this week, he may once again be relegated to obscurity. His fellow Slovakians should be grateful for his principled stance and his foresight, and perhaps return him and his party to government when the costs of the betrayal of other parties become all too clear.

This just in! Berlusconi must face a vote of confidence tomorrow in the Italian parliament after defeat in a routine vote on government budget and accounts yesterday. Perhaps the Slovakian teaching moment will last longer than one day?

UPDATE (2): The three outgoing coalition parties have agreed with the opposition SMER party to pass the EFSF in a further vote to be scheduled before the end of the week. An election will be held on 10 March 2012. I hope the Slovakian voters remember then that the party that did not betray them to Brussels and the banksters was SaS.

Monday, 10 October 2011

Dexia, Mafia and Revolution

I knew I had seen the script we're living somewhere:

What I am saying is, we have now what we have always needed, real partnership with the government.

And this is what follows: Revolution!

What does that tell you? It tells me that when predatory bankers and their complicit government cronies cannibalise the real economy to the tipping point, then regime change is just a matter of time. Politicians are acting like bankers are their only paymasters. In reality the bankers are just the noisiest and most demanding paymasters - until the people rise up in anger.

This morning the 11 million people of Belgium have woken to find themselves the 100 percent owners of a bankrupt and unprofitable retail bank at a cost of 4 billion euros, and guarantors of a further joint 122 billion euros in liabilities with France and Luxembourg. The shareholders and bondholders will be grateful, and the markets are accordingly delighted, but pity the poor Belgian taxpayer. The CEO and Chairman of Dexia have admitted that the bank operated as a hedge fund, and yet they are given serial bailouts at the taxpayers' expense. The Belgians have already thrown out their government, so now what do they do?

UPDATE: Ironically, after putting up this post about how crony accommodation of the banksters can lead to revolution, the reality is unfolding even now in Slovakia. Slovakia was the last country required for unanimous consent to the extension of the powers of European Financial Stability Fund. The prime minister made the vote on the EFSF a vote of confidence in the government. Ooops. Looks like she loses her post and the government tonight, as one of the smaller parties took offense at the blackmail against the national interest.

My new hero is Richard Sulik, leader of the coalition's SaS party, who is willing to take down the government rather than betray his country's taxpayers. The vote, which has had the market on edge all day, has now been indefinitely postponed. Even if the EFSF vote passes this week, when the fecal matter hits the ventilator in the not distant future, the voters will remember that Mr Sulik tried to do the right thing.
“I'd rather be a paraiah in Brussels than have to feel ashamed before my children, who would be deeper in debt should I back raising the volume of funding in the EFSF bail-out mechanism,” Mr Sulik told parliament.

Mr Sulik resisted the entreaties of Ms Radicova and other officials, who stressed that Slovakia's credibility as a responsible member of the eurozone was on the line.

While the trials of countries such as Portugal and Ireland do find sympathy in Slovakia, which is the second-poorest member of the eurozone, there is very little feeling for Greece, which is seen by many Slovaks as having caused its own problems.

“Extending the EFSF is mainly for saving foreign banks, and it will be expensive for Slovakia,” said Mr Sulik.

Zerohedge is liveblogging the Slovakian Parliament for those who like their crony capitalism raw and in colour.