|The News Line: Editorial
Tuesday, 29 May 2012
Lloyd’s pulls the plug on Europe
NOT just Greece but the Eurozone and, by extension, the whole of Europe is a financial basket case that is heading inexorably towards a gigantic economic collapse.
That is the inescapable conclusion to be drawn from the news delivered this weekend that Lloyd’s of London, the most powerful insurance market in the world, is reducing its exposure in Europe in anticipation of the euro self-destructing and bringing down the capitalist economies of the entire continent.
Richard Ward, chief executive of Lloyd’s, in an interview with the Telegraph, said: ‘I don’t think that if Greece exited the euro it would lead to the collapse of the Eurozone, but we need to prepare for that eventuality.’
In fact, Lloyd’s have been preparing for this eventuality since last September, when they abruptly pulled billions of pounds worth of deposits out of European banks in the realisation that European governments would not be able to continue propping them up. It was not just banks in the so-called ‘peripheral economies’ but all over Europe that suddenly found Lloyd’s was pulling out.
As the Telegraph helpfully reminded its readers, one of the main triggers for bankruptcy in business is the withdrawal of credit insurance for its suppliers and this rule is now being applied to whole countries.
In fact, individual enterprises or entire nation states do not go bankrupt simply because credit insurance is withdrawn, rather, this insurance is withdrawn when it becomes obvious that bankruptcy is inevitable and the insurers are running a mile from huge losses.
This is certainly the case with Lloyd’s, and they are not alone in the belief that the game is up and that collapse and ruin cannot be confined to Greece. While assuring the public that everything is under control and that the Eurozone will survive come what may, it is clear that behind the scenes total panic has set in amongst the banks and financiers.
Also at the weekend it was revealed, by the head of the Swiss central bank (SNB), that they were similarly drawing up an action plan for the euro’s collapse. In language almost identical to that used by Ward, the chairman of SNB said: ‘We have to be prepared for the scenario of a currency union collapse, although I don’t think it will happen.’
When a banker tells you they are preparing for the worst but don’t think it will happen it means they are getting ready for a disaster of epic proportions and that collapse is inevitable.
The inevitability of a European-wide collapse was brought home with the Spanish government being forced to pump a further £15 billion into the part-nationalised bank, Bankia (Spain’s fourth largest), money that it admits it simply doesn’t have.
Instead, it is relying on the European Central Bank to finance the bail-out, a move the ECB is steadfastly refusing to contemplate on the grounds that this is just the tip of the iceberg and that all of Spain’s banks need digging out of bankruptcy, something the ECB just cannot finance.
With the banks and financial institutions deserting the sinking economy of Europe in their droves, it was left to the head of the International Monetary Fund, Christine Lagarde, to spell out precisely how capitalism intends to survive the world crisis. In an interview with the Guardian on Saturday she bluntly insisted that the Greek working class were to blame for the crisis and that they had to pay, claiming it was now ‘payback time’.
Workers did not cause this crisis, it was caused by the banks, and the only payback will be through the expropriation of the banks by the working class as part of the socialist revolution.
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