Austerity: Why and for Whom? by Rick Wolff. On-line article at Commondreams.org. Links austerity programmes across Europe to conditions set by banks lending to governments due to fears of defaults on government debts. For instance the high rates of interest imposed on Greece in return for bail out loans by European banks. If governments default on loans then their credit rating may prevent them borrowing more, the banks will collapse and the Governments will not be able to borrow form banks to bail them out! Is this right? The banks have lent money to governments to bail themselves, the banks, out. Presumabley these are not the same banks – it is the banks not crippled by bad investment (the ‘national’ banks’?) that are lending to governments who then use the money to bail out the failing banks. The public funding cuts are to ensure governments can service these debts to the bank, maintain their credit ratings so that, if necessary, the governments can bail out the banks in the future. If the national banks lent the money to governments to bail out the failing banks, why couldn’t the banks have lent directly to other banks? I assume they want governments, their tax streams and assets, to guarantee the loans. It is generally recognised that European national banks will make significant profits out of lending to Greece as the interest rate is significantly higher than the banks can borrow money themselves.
All this leaves open the question – why do the austerity measures punish the poor and, despite everything, wealth still grows and concentrates? That’s because for the wealthy, every problem is an opportunity. And for the political right, ironically, via neoliberal policies, it is an opportunity to enact barely masked ideologically informed policies. Given the high profits banks will make out of loans to Greece, for instance, this looks like a direct transfer of money from the poor to the financial institutions that got us into the mess in the first place.