17 July 2013

SZ: Euro area countries learning the hard way

A study by the research institute Finpolconsult - looking at bailout funds spent at seven different banks in Greece, Spain, and Cyprus – concludes that €35 billion out of a total €90 billion have been wasted due to blunders in the implementation of the rescue measures.

Translated from the German

A new study, conducted by the Research Institute Finpolconsult on behalf of the Green parties in the Bundestag and the European Parliament, attempts to assess the total sum of taxpayer money that is irrevocably lost and that the rescuers of European banks could de facto have saved.

The author of the study, Hans Joachim Dübel takes a close look at the latest examples from the eurozone: seven banks from Greece, Spain and Cyprus. In total, €90 billion were spent to save the financial institutions of the three countries - and a good third of that, about €35 billion, could have been saved had the participating States and bank rescuers not have allowed for so many blunders. In Spain even, no tax money would have been necessary at all.

Dübel came up with this number by calculating how much money the governments could have recovered from the creditors of the banks. To an extent, he argues, investors had been able to withdraw their money just before state intervention - and the governments had not prevented this. He further explains that crisis countries should not have acquired conventional shares of the ailing banks, but instead shares that were less risky and would have protected better against future losses. Another mistake, according to Dübel, was the delay in the bank bailouts. That had given the creditors the necessary time to pull out of those financial instruments prone to the greatest losses.

"The crisis policy of Angela Merkel and the troika was good for bank creditors and bad for the taxpayer", criticised Gerhard Schick, financial policy spokesman for the Greens in the Bundestag. MEP Sven Giegold concludes from the study that Europe needs a common banking resolution authority soon, even if the German federal government is still resistant to the idea.

At least politicians and the European Central Bank have learned some things since the rescure of Greek banks three years ago: Back then, creditors had almost no part in the losses, in the case of Spain already a quarter of the creditors was included in the bailout and, in the case of Cyprus, two-thirds of the creditors at the Laiki Bank and nearly all in the case of the Bank of Cyprus had to pay for the rescue. 

Full article (in German)

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