The Biggest Financial Crisis in 75 Years

With Portugal following Ireland and Greece into the hands of an EU/IMF sovereign bailout, the French are leading moves to curb global bankers, widely seen as the culprits.

Icelandic NO on IceSave encapsulates the nature and state of the crisis. (Logo image credit Mediapart)

As weaker Eurozone countries fall like dominoes under a tsunami of debt might we be witnessing the onset of global monetary collapse?  That question is no longer just whispered in European chancelleries, so whither France?

There are fears that the global monetary system is on the brink of an historic collapse as governments battle to prevent markets precipitating a slow motion chain of sovereign defaults in the European Union.

What started with bank failures in the US in 2007/2008 has now become a full blown sovereign debt crisis, the worst global upheaval for 75 years and one raising serious concerns about the future of the monetary system.

After a recent European Council meeting ministers issued a statement on the eurozone crisis which said in part: “If, on the basis of a sustainability analysis, it is concluded that a macro-economic programme cannot realistically restore the public debt to a sustainable path, the beneficiary Member State will be required to engage in active negotiations in good faith with its creditors to secure their direct involvement in restoring debt sustainability.”

This, in the view of  Jeremy Warner writing in the London Daily Telegraph means that “for the first time, EU leaders explicitly recognised the principle and inevitability of bank and sovereign debt default in the eurozone”.

Foreign banks have a US$2.5 trillion total exposure to Greece, Ireland, Portugal and Spain once all forms or risk are included, according to the Bank for International Settlements (BIS). “The sheer scale highlights the systemic dangers if the European Union fails to stabilise the debt crisis,” writes Ambrose Evans-Pritchard in the London Telegraph .

According to Business Insider “A 20% haircut on French bank exposure to Greece, Ireland, Spain and Portugal (GISP) would wipe out French bank equity.”

The dangers in the situation cannot be overemphasised given the implications for the EU, the single currency and even the European Union itself, not to mention quality of life here in France.

French News Online earlier highlighted concerns expressed here by BIS about the size of the French banking exposure to the Portugal, Ireland, Italy, Greece and Spain.

See this graph:

Red lights flashing for French banks?

France which has had an historically tumultuous relationship with banking – Roman Catholic distrust of the system goes back to Louis XVI — is now spearheading a trans-European move to bring the economy-wreckers of 2007/8 to book.

The move to bring the world of finance under control comes as Portugal, the latest sovereign casualty in the ongoing North Atlantic financial tsunami, joins Ireland, Greece (and soon Spain?) in begging for what at grass-roots level, are highly unpopular EU/IMF bailouts.

Finance Watch’s backers describe the banking lobby as a ‘danger to democracy’ and believe that the lobbying power of major corporates in the financial industry, should be restrained. (They are not alone, see our latest Money page feature for more details including a link to Nick Cohen in the London Observer who labels bankers ‘mafiosi’.)

The activists have disturbed the French Banking Federation and its lobby which have run several advertising campaigns to defend their side. Even Gerard Rameix, the banking credit ombudsman (Médiateur national du Crédit) says: “Banks have played the game in France, avoiding the difficulties seen among our neighbours.” Stanislas Dupre, CEO of Utopia, a sustainable development consulting firm, has criticised the anti-banking vitriol in France saying: “This crisis of confidence, and even resentment is detrimental in the sense that the French save 16% of their earnings, and this valuable resource should not be marred by a misunderstanding and a rejection of the banking system.”

However such is the interconnectivity of banks in a globalised economy and the damage their casino banking activities have done to people’s livelihoods, that the groundswell now building, seems utterly dismissive of such platitudes.

As Paul Jorion (a writer for Monde-Économie and commentator on France’s BFM Radio) notes on his latest blog: “Vous avez aimé le film « La crise », vous allez adorer « La Crise II ». Encore mieux, encore pire” (If you enjoyed the film ‘The Crisis’ you are going to love ‘The Crisis II’.)

The moves to rein in the finance industry, driven mainly by Europe’s Greens and Socialists, come as Iceland on April 9 again rejected punitive demands from the UK and the Netherlands that taxpayers foot the bill for the Icesave bank collapse. In a referendum on the issue of repayment some 60% of those voting rejected the repayment terms, which along with the cost of USD4.75bn IMF and neighbouring states bailout loans, have been compared to the punitive terms dictated to Germany at the Treaty of Versailles after World War I. The two creditor states have now threatened to take the matter to a European court. See this Reuter timeline of Icelandic defiance and some tough talk in support of Iceland here: “Readers should be made aware of the fact that countries do sometimes default and they can subsequently recover and prosper. Many people may consider the short-term pain stemming from a debt default to be preferable to the long-term costs that might come from policies adopted to prevent default” .

Religious suspicions of banks among the French were reinforced by a series of financial scandals dating from the reign of Louis XVI when France’s first central banker, John Law, a Scottish adventurer and murderous degenerate, presided over one of the great financial disasters in history: the Mississippi Land Scheme, aided and abetted by his earlier creation of the first modern central bank in Europe, the Banque Generale (later re-named Banque Royale).

The French monarchy had foundered on bankruptcy, stemming from Louis XIV’s continental wars. France’s considerable National Debt led Napoleon to set up the Bank of France in 1800 to break free of the power of bankers and debt. Napoleon is reported to have said: ” … Money has no fatherland. Financiers are without patriotism or decency. Their sole object is gain.” In 1882 the collapse of the Union Genérale Bank, a Catholic bank founded with the blessing of Pope Leo XIII, left rich and poor Catholics in dire straits. The collapse was initially claimed to have been due to the machinations of rivals, including the Rothschilds, a theory that was subsequently debunked.

The upshot of all France’s banking mishaps has, according to popular wisdom meant that “the French hate their garage and their banker” in that order.

Finance Watch says it aims to “create a counter-expertise to banks” and end “the imbalance between the strength of the financial industry and a lack of lobbying by NGOs in the field of finance”, which has led to a democratic deficit.

It has appointed a full-time project manager, Thierry Philipponnat – whose background is in finance and NGOs– to steer the launch of Finance Watch.

Paris-based Thierry Philipponn who began his financial career 24 years ago at options trading firm O’Connor & Associates in London, is leading an organisation in turn backed by a French Green MEP Pascal Canfin and more than 70 MEPs. Philipponn, who also worked for Exane in Paris; UBS in London; BNP Parisbas Paris; and Euronext/LIFFE as group head of equity derivatives, has a penetrating insiders view of what has been going on.

European Green MP Pascal Canfin has been the driving force behind Finance Watch which is overwhelmingly backed by Greens, Socialists and Social Democrats in the European Parliament and includes just one UK representative: Arlene McCarthy, a member of the EU parliamentary Committee on Economic and Monetary Affairs and rapporteur for the directive ‘Capital requirements for the trading book and for re-securitisations, and the supervisory review of remuneration policies’.

Pascal Canfin MEP (Greens) said the organisation hopes to get half of their 2 million euro per year budget from the European Commission: “In line with that received by BEUC, the European Bureau of Consumers Unions.”

Among hot topics that will come under the beady eye of Finance Watch are: The rules of capital allocation of banks, the question of “too big to fail, bonuses or supervision of OTC derivatives markets.

Inspired by calls for an organised bank run against French institutions Pascal Canfin earlier launched the change your bank website ” to encourage people to transfer their money to banks seen as more acceptable such as Nef, Banque Postale and Credit Cooperative: “We prefer our savings be managed by banks that invest them locally, have not been part of the financial casino, refuse to establish branches in tax havens or to pay obscene bonuses, ” the website says. Friends of the Earth have also set up a website that reinforces the current campaign against casino bankers.

The video clip below shows a TV interview on France Info with Jacky Blanc, head of the management board at NEF, a parabanking socially aware cooperative with 25,000 members. Among other points he tells his audience, the coop operates as a totally transparent intermediary between savings and loans. “We give our members full details of each loan we make. We set-up 20 years ago and we fund socially useful start-ups, eco-farming and mortgages for ecologically-friendly homes. We don’t have a full banking license so we have no structured investment products on offer and our savings accounts pay some 1% to 2% interest currently.”

Jacky BLANC, France-info,07 12 2010 par FranceInfo

Meanwhile Pascal Canfin and his European parliamentary colleague believe their Finance Watch campaign is gaining critical mass. The French banking sector has put on a brave face in public playing down all the attacks it has faced, including the ridicule over the Kerviel affair but its concern is clearly shown by the major advertising offensive it launched in national media. The French Banking Federation (FBF) campaign insisted French banks “have not been bailed out by the taxpayer, did not cause the crisis , have increased their lending to the economy, learned from the crisis and employ 400 000 people” .

Finance Watch supporters include leading EU parliamentary figures such as: Pascal Canfin, Daniel Cohn-Bendit and Eva Joly from the French Greens. Other French politicians and senators, again mainly Socialists and Greens who have signed up to the initiative include: François Patriat (France, Côte-d’Or senator (PS), president of Burgundy Regional Council; Robert Tropeano (France, RDSE, Senator for Hérault); Navarro Robert (France, Party socialist, Senator); Nicole Bricq (France, Socialist, Senator), Idiart Jean-Louis (France, Socialist , deputy for Haute Garonne), Pierre Alain Muet (France, Socialist, deputy, member of the finance committee), Alain Rodet (France, Socialist, deputy for Haute-Vienne, member of the finance committee), Roland Ries (France, Party Socialist, Senator and Mayor of Strasbourg)

Meanwhile the EU parliamentary Committee on the Financial, Economic and Social Crisis released its views on how to respond to the ongoing crisis at end March here: “Beyond economic governance: the EU needs new growth model
Economic and monetary affairs – 29-03-2011 – 14:43
Committee : Financial, Economic and Social Crisis
Committee Chair Wolf Klinz (ALDE, DE) noted:
“The crisis is not over … it has now become a political one. To get citizens on board, we need to be clear on what citizens can get back.”

Public Affairs News reported earlier on Michel Barnier's calls for more action to reduce the 'domination' of large banking groups.

See the rest of the Public Affairs News article by Ian Hall here:

Meanwhile the size of the debt is both a very current and controversial issue in the US whose approach to it differs considerably from Europe’s. Here is Republican congressman Paul Ryan, chairman of the (US) House (of Representatives) Budget Committee on the crunch set to bury the United States, unless public sector spending is cut to below 20% of GDP and set firmly on a downward path. This however is not a message the spend-thrift Democrat President Barrack Obama wants to hear:

Story: Ken Pottinger
editorial@french-news-online.com

Downloadable MSWord file A taster of still virulent anti-banker venom :
“Four years later and the banksters are misguided if they think they have gotten away with their grotesquely fraudulent behaviour – many victims want blood.”