A ‘LEHMAN BROTHERS debt crisis’ in the heartland of Europe is how the news that a major Austrian bank collapsed last week was described by one economic journalist.
The collapse of Austria’s Hypo Alpe-Adria Bank International – which was declared bankrupt with debts of 10.2 billion euros – was further described as a ‘black swan’ event for European banking.
A black swan event is used by bourgeois economists to describe a crisis that apparently appears out of nowhere and whose effects are both catastrophic and unpredictable.
In fact the collapse of the Hypo bank was entirely predictable. Like many other Austrian, German and other north European banks, it had been engaging in huge speculative and very risky loans in central and eastern Europe.
With the deterioration of the economies in this region under the impact of the world crisis, a crisis intensified by the US and EU’s drive to war against the working class of Russia and Ukraine, all the bank’s assets were revealed overnight to be huge debts.
This crisis does not affect just one ‘bad’ bank in Austria. The influential financial news organisation, Bloomberg, wrote that the decision by the Austrian government to wind up the bank, ‘sent ripples through the financial system, causing credit rating downgrades in Austria and bank losses in Germany’.
Next year, every country in the EU will be forced to adopt the ‘bail-in’ principle when confronting bank crashes.
Bail-in simply means that the bank’s bond holders and large depositors will be forced to take all the losses on a bank collapse.
So far, Germany and Austria have been the only two to have fully implemented this law.
The Austrian government has refused to bail-out the bank, but it is not just the German and other banks that will take the hit.
Under terms agreed to bail-out the bank in 2008, following the Lehman’s crisis, the Alpine region of Carinthia was forced to become the ‘theoretical’ guarantor of the bank’s debts.
Now this theoretical risk has become an actuality and Carinthia faces losses of 10.2 billion euros because of the toxic debt – five times the annual budget of the small Austrian state.
Carinthia cannot pay this debt and now faces bankruptcy – the first case of mini-state bankruptcy in Europe. This is not an isolated case, analysts reckon that there are many regions in Europe caught in the same trap, including regions in Belgium and Italy.
Already, the Austrian government’s decision to cut Carinthia loose and let it sink on its own is being compared to the US bankruptcy of the city of Detroit.
The whole strategy of ‘bail-in’ instead of ‘bail-out’ was devised as a means of convincing the working class that Europe had solved the banking crisis, that no longer would the capitalist state assume the debts of the too-big-to-fail banks and pass them on to workers and their families through the most savage austerity and that the Greek crisis was contained, confined to the south of Europe.
It is now painfully clear that this was a tissue of lies covering up the bankruptcy of the entire capitalist banking system.
The banks are still too big to fail and always will be under capitalism. They will demand a bail-out and demand that it is paid for by the working class.
What is happening in Austria this week is just the beginning. Its ripples will spread throughout the world banking system with the banks demanding austerity measures in every country in Europe, along with the prospect of state bankruptcy, that will exceed anything seen so far in Greece.
A capitalist future of never-ending austerity and state bankruptcy, places on the immediate agenda the revolutionary struggle of workers throughout Europe to put an end to the austerity governments and replace them with workers governments that will nationalise the banks and place them under the control of the working class as part of a planned socialist economy.
Above all it demands the building of parties of the Fourth International in every country to lead this struggle to victory.