THE European Central Bank (ECB) published the results of its latest stress tests carried out on 123 European banks on Sunday, results which showed that, even according to central banks own dubious criteria, 24 of them didn’t have enough capital to survive another economic crisis.
The ECB by its own reckoning found a total capital shortfall of 25 billion euros at the heart of the European banking system.
The weakest country was Italy where nine banks failed having a combined shortfall of 9.4 billion euros. Greece and Cyprus contributed three failed banks each, while Ireland’s Permanent TSB also failed.
All four British banks included in the test managed to pass, with the bailed out Lloyds just managing to scrape through by the skin of its teeth – a fact that led to an immediate drop of 2% on its share price.
Italian banks had an even bigger drop of up to 18% with the world’s oldest bank, Monte del Paschi di Siena, having its shares suspended along with a warning that it would have to find an extra 2 billion euros on top of the 5 billion euros it had raised over the past three months.
As one financial analyst put it, banks like Monte del Paschi are a bottomless pit, explaining that ‘with the Italian economy continuing to contract and 18% of the banks’ loans being problematic, it is hard to envisage a scenario where the bank won’t end up like Oliver and coming back and asking for more’.
This illustrates the meaninglessness of all these bank stress tests, they simply do not take into account the real state of the capitalist economy, not just in Italy but throughout the rest of the capitalist world.
Who can forget the last stress test conducted on EU banks in 2011, a test that the Belgium bank Dexin passed with flying colours – it collapsed three months later after an ‘unexpected’ bank run.
Or the fact the Irish banks were pronounced in rude health just before their catastrophic collapse in 2010, forcing the government to bail them out.
This stress test was designed to act as a fig leaf to convince the working class and youth of Europe that the banks are at last solvent, responsible bodies who can be trusted not to plunge the world into an almighty crash. That all the sacrifices in terms of jobs, pay and welfare that have impoverished millions of workers just to save banks from a crisis of their own making has been worthwhile.
However, even on its own rigged test the ECB is forced to admit that 25 of the most important banks in Europe are actually bust.
The fact that after years where trillions of pounds worth of money has been pumped into the banking system, through quantitative easing and government bail outs, one fifth of the banks still cannot pass the stress test, shows just how bankrupt the banks really are.
In November, the ECB will assume complete control of the banking system from the regulators of the 18 member eurozone countries.
The ECB, in short, will assume responsibility for the debts of the entire European banking system and they are determined, as are the British bankers, that it will be the working class who pay for their inevitable bail-outs through even more savage austerity cuts.
These stress test results point in only one direction – to a massive ramping up of the class struggle in every country as the working class are forced to fight against a bankrupt capitalist class determined to drive them into abject poverty to save the banks.
This crisis is producing a movement of millions of workers and youth, a revolutionary movement that hates capitalism and the bankers and is not prepared to sit back and accept a capitalist future of poverty and starvation.
The urgent task of the hour is to build the revolutionary leadership, sections of the Fourth International, in every country to lead this mass movement to the victory of the socialist revolution.