Well no, the June Summit between the Heads of State and Government did not lead to a breakthrough. Even its alleged main outcome remains on paper only. A bailout of €100 Billion for Spanish banks may be directly transfered to the banks now – until recently these transactions could solely be made via the state. However, there is a condition for this new procedure: till the end of year the 17 national banking supervision committees must form a single powerful administration under the leadership of the European Central Bank. The road thither could be long and hard indeed.
Thus the headline of a commentary in the Financial Times sceptically reads “More questions than answers after the Summit”. The only positive thing to come out of the summit is a half sentence in its final declaration, in which the imperative “to break the vicious circle between sovereign states and banks” is affirmed. Yet in fact the resolutions amount to the same as usual, namely providing public funds for bank bailouts.
The moment of truth could come at the latest next year, when three of the major national economies of the Eurozone need to restructure a considerable part of their state debts: France €300 Billion (which equals 17% of their annual economic performance), Spain 20% and Italy 27%. Should these restructurings fail it would prove that the ESM does not have the necessary means to step in and prevent further infection.
Mario Draghi, president of the European Central Bank, declared the European Welfare State to be a “discontinued model” in an interview at the end of February. The European Fiscal Pact passed shortly afterwards following the pressure of the German Chancellor will ensure that his vision comes true.
This “vicious circle between sovereign states and banks” will not be broken by more austerity measures but calls for a change of the political paradigm. Health, education and services of general interest need to be unhitched from speculation and provided publicly. The reorganisation of the financial sector, starting by the European Central Bank, is crucial. If the Euro is supposed to survive, the financial supply of the European States must not be dependent on the financial markets. The states should thus be able to finance themselves via the ECB, which would require a change of its statutes.
It is inacceptable that the main causers of this crisis – private banks such as PNP-Baribas, Deutsche Bank, HSBC, UBS, Uni-Credit and Banco Santander - should also be the beneficiaries of the rescue operations. These financial institutions, which are reputedly too big to fail, are indeed too big to exist. Bailing them out at the expense of the public is a luxury we can ill afford in the future. They must be dismantled, redimensioned and transferred into public property.
A tax on financial transactions is necessary. Yet the core problem is something else, namely the exorbitant profits which provide the main source of financial speculation. Therefore the redistribution of income and wealth has to be at the heart of each alternative strategy, which in return requires an effective taxation of profit and estate.
Such an alternative calls for democracy and cannot be realised without a fundamental change in national and European political power relations. Consequently, the European Integration Process needs to be put on a new – also contractual – basis as to set about the democratic refoundation of the European Union.