Also, “austerity” continues to mean bailing out banks, with governments making no differentiation between protecting small depositors (okay) and protecting sophisticated institutional investors (maybe a paradox, but either way, not okay).
Less than 24 hours after the French election, Spain was putting together a taxpayer-funded rescue package for something called Bankia, according to the FT:
Spain is planning a state bail-out of Bankia, the country’s third biggest bank by assets, in a move likely to involve the injection of billions of euros of public money into the troubled lender.
Is this what politicians think that European voters want to spend their “saved” austerity money on — more bank bailouts?
Why not let the bank’s shareholders and creditors shoulder the losses?
This same topic is going to come up in Ireland, too, and soon, as Irish voters ratify (or reject) the new European treaty at the end of the month. They’ll find find themselves wondering why they are being “austere” partly for the sake of protecting bank investors from market forces.
It’s far from conclusive that European voters are rising up against austerity. They could just as easily be rising up against incompetent austerity — and more bank bailouts.
Ironically, if François Hollande and other newcomers start to question the Western orthodoxy that bank debt equals sovereign debt, they’d be introducing free-market forces — as opposed to socializing forces — into Europe.
And, in the long run, they’d be protecting sovereign debt, too, as it’s getting to the point where using a dollar to prop up a bad bank means not using a dollar to prop up a bad government.
— Nicole Gelinas (@nicolegelinas) is a contributing editor to the Manhattan Institute’s City Journal.