In These New Times

Cailean Bochanan

19th July, 2015

Just before the Greek referendum George Galloway tweeted:

“Greek Partisans will vote NO in Sunday’s referendum. There is European life after the Euro. No more bail-outs for bankers. Go for growth!”
Galloway would , of course, have been equally vehement in his opposition to the bail-out of the City of London in 2008. Well, actually, no. In statement made at the time he said:

“In the midst of this financial crisis which threatens us all, at last the government is taking action which may begin to shore up the banking system. I hope that it is not, as many in the City are saying, “too little, too late”. “It was essential the government propped up the banks’ capital base, it had to provide lending to banks that can’t borrow money from others to pay their debts. And we had to have a guarantee of bank debts, if we were not to see a full-scale financial panic and the collapse of the whole debit and credit system. But having put the money in, the government now needs to force the banks to pay the public back in return.”

Leaving aside the piety at the end this was simply a full endorsement of the bail-out. In an extraordinary but characteristic bit of sophistry Galloway was able to spin the bailout as a break from neoliberalism, as a break “from the outdated dogmas of free market economics.”

This was essentially the left’s response to the bail-out with, in addition, the deft but utterly groundless claim that the bailout constituted in some way a partial nationalization of the banks and that it remained merely to complete this process.
There were no mass protests called against the bail-out by the left, no taking to the streets, no calls to arms against Britain’s fascist regime of bankers.
But that was then and this is now. No, it’s more that then the survival British banks was at stake and now it’s the survival of German ones!  It’s for that very same reason that the Tories don’t want to have anything to do with the Greek bailout: unlike the bailouts of Spain and Portugal and. most especially, Ireland, British banks wouldn’t take a large hit if Greece defaulted. But German banks would.(In fact, it may be the ECB itself that would take much the losses since it has apparently used QE to buy up Greek debt held by the banks.)
So, since it was German banks that were at stake “taking action to shore up the financial system” was no longer the desired course of action. Sod the German banks, let them go to hell and Greece come out of their “fascist” Euro project. Suddenly, the entire left came out in concert against Europe. They must have thought the hour had come for such a drastic policy shift: the IMF were calling for more debt write down, Schauble was hinting at grexit. A Europe of the banks was a monstrosity which no one could support. And there was silly, old me looking on bemused, still thinking that the real centres of global finance capital were the City and Wall Street.
But. yes- a Europe of the banks is a monstrosity but as Martin Schulz tried to explain, putting the banks into liquidation, back at the beginning of the Greek crisis in 2010, would have been inconceivable. There were no measures in place for a Eurozone wide oversight and control of the banking system. Nor could deposits have been guaranteed- not just creditors and shareholders, but ordinary depositors would have lost everything. It would have been the same had the British financial system been allowed to go bust in 2008. What do you get when you nationalize insolvent banks? This brings us to the systemic nature of the crisis which the left have chosen to ignore.
The Greek crisis presents two very striking features. Firstly, Greece didn’t exit the Eurozone. Secondly, Europe was prepared to envisage grexit. The first outcome shows us that the Eurozone project still has overwhelming popular support. The second tells us that the Euro leadership have come a long way since 2010 and that the Eurozone can now contain the damage from both grexit and Greek default. Concretely, the banking union, devised by Michel Barnier, means that bail-in, the de facto “nationalization” of the European banking system, at least of the larger banks, is now conceivable. It’s true that a Euro wide deposit insurance scheme is not yet in place but Barnier claims that deposits guarantees up to 100,000 euros are in place at state level, although it has to be said, it would require a huge sum to cover that, depending on just how bad the state of the Euro banking system is. In any case, it will represent a huge social cost.
What about the British banks? Well, at the same time that the City shields itself from the threat of Eurozone regulation, the “partial nationalizations” are being predictably reversed at massive loss to the taxpayer. Another bailout, in fact, to follow QE and the 2008 heist. HSBC seems to have absconded to China and perhaps the Chinese will buy up RBS. A Chinese takeover and recapitalization of the City and a reorientation of banking towards the real economy could provide a way out for Britain. As long as we don’t follow the left’s latest hair-brained scheme to leave Europe.