Guest post. Translated from the French by Tim Gupwell
In Spain, nearly 220 billion Euros have vanished into thin air during the first quarter. According to the Bank of Spain, foreign investors, but also Spanish ones, are responsible for this massive exodus of capital which concerns loans and deposits, but also share portfolios and sovereign debt securities. The capital outflows are accelerating: during the month of June alone, 56.6 billion Euros were registered. For the first six months, this outpour was triple the figure that had been recorded in 2011. The Madrid Stock Exchange lost 15% of its value during this same period and the proportion of the public debt held by foreign investors has plunged in a year from 56.3% to 36.1% last June.
Also observed in Greece, this same phenomenon might well emerge in Italy on a far greater scale. The investors concerned predict the exit of one country or another from the Eurozone, and ultimately its collapse, thus contributing to this becoming a reality. It is this that Mario Monti has issued a warning about.
It is with regard to this that Benoît Coeuré, an ECB board member, indicated during his appearance at the Summer Workshop of the French Business Confederation MEDEF that he sees “advanced signs of a disintegration of the single capital market in Europe”, and made the observation that the Euro’s integrity is “under threat”.
But who then are these investors who bear such a heavy responsibility, and whom Benoît Coeuré called on to renew their “confidence in the Euro”? “It is very important that the banks keep on lending beyond their borders”, he remarked – thus giving away their identity at a stroke! So it is the European Banking system which is continuing its insidious sabotage in the heart of the Eurozone. After having deserted the bond market and left the coast clear for a highly anticipated ECB intervention, it is now bringing its capital back to more clement skies and thus sinking the banks unfortunate enough to not be domiciled elsewhere. The EFSF/ESM will, as a consequence, be required to bail-out the Spanish banks already suffering from the collapse of the property market. Double blow – not only the States, but the banks too will be badly affected.
Such is the additional price to pay, so that the invisible face of the financial system can keep the flag flying. Who then is ultimately responsible for the growing threat to the Euro, the spendthrift states who have to mend their ways, or the banks taking their little precautions? Who then is to be condemned, the agencies that stoke the fire with their self-fulfilling prophecies or the banks that carry them out?
There is an astonishing consistency to this shirking of responsibility!