AMID banks posting further huge losses and their share prices collapsing, after the near extinction of the world’s largest banks last October, Prime Minister Gordon Brown announced a new multi-billion-pound bail-out from the government yesterday.
Worldwide, over the last week, banks have revealed losses of billions over the last three months of 2008 and in response, their share prices have plummeted.
Alongside this, the recession that has gripped the major capitalist countries, is rapidly turning into a full-blown slump. In December, 524,000 workers lost their jobs in the United States. It is predicted that the eurozone economy will shrink by 1.9 per cent this year and unemployment will go up to 10 per cent and that the British economy will contract by 2.7 per cent and unemployment will hit 3.25m next year.
In the US, the world’s largest bank, Citigroup, revealed losses of $8.3bn (£5.7bn), Bank of America $1.7bn (£1.2bn) and the part-nationalised RBS group in Britain is set to announce losses of £8bn and to write off £20bn in bad debts.
Last October, the Brown government put £37bn of taxpayers’ money into British banks and extended to them a further £100bn in loan guarantees, to ward off a meltdown in the City of London. So far the Labour government has committed £600bn of taxpayers’ money to prop up the banks.
The package announced yesterday by Brown and Chancellor Alistair Darling will provide insurance for banks against future losses from ‘toxic debt’, for a fee.
Brown said: ‘These are extraordinary times and they require unprecedented action.’ He added: ‘The scheme is temporary, based on loans rather than grants, is backed by assets and can be capped if necessary.’
According to Darling the insurance provided for the banks would make ‘very specific legally binding agreements to lend more money’.
The government has also given the Bank of England a new role where it will have a £50bn fund to buy debts from major companies, such as corporate bonds, to provide funds to big business.
In pursuing their policy of ‘throwing good money after bad’, Brown and Darling refused to say how many billions of pounds of taxpayers’ money would be handed over to the bankers in their latest scheme.
Brown’s desperate measures to save collapsing British capitalism at any cost, by buying into banks which are broke and turning the Bank of England and the Treasury into dumps for their ‘toxic debts’, means throwing away billions of taxpayers’ money and creating conditions for state bankruptcy.
Britain will soon join Iceland, which has already gone bust, and Greece, Portugal and Spain, where government bonds are already considered to be risky.
Collapsing British capitalism and its champion, the Brown government, are preparing a catastrophe for millions of workers and middle-class families – unemployment, loss of homes, slashing welfare benefits and the decimation of essential services, like health and education through cuts in public spending.
Workers must demand their trade unions snap out of their paralysis and confront this threatening catastrophe. Union leaders who have been acting as cheerleaders for the government, and have accepted sackings and pay cuts must be kicked out.
Within the unions there must be a struggle for a programme of action and socialist policies.
l Save jobs by occupations of workplaces threatened with closure, nationalise them and place them under workers control. Answer redundancies with worksharing, with no loss of pay.
l Fight rocketing prices with index-linked pay deals, based on a cost of living index drawn up by the trade unions.
l Nationalise bankrupt banks and major companies and put them under workers’ management.
In every union the fight is on for mass strike action going forward to a general strike, to bring down the Brown government and replace it with a workers government that will implement socialist policies.
It is urgent that the trade unions are transformed into fighting organisations to prevent this threatening catastrophe. The Workers Revolutionary Party is building a new leadership in the unions to organise this struggle. Join the WRP today!