‘Green Shoots’ – A Mirage Of Desperate Capitalists

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THE European Central Bank is having nightmares about the state of the 25 banks that underpin the financial system of the Eurozone within the European Union.

The ECB is literally banking on a rapid recovery of the crisis-hit world economy, which will have to perform this miracle without the bank credits that it had become so accustomed to.

A European Central Bank official confirmed yesterday: ‘2009 is not the problem. Our Euro-area banks are well enough capitalised to cover losses. The problem is 2010. The problem is the duration of the slump, and the collapses that are rapidly emerging in the majority of Eastern European states.’

Already the ECB is predicting a 4.6% contraction of the economy this year and sees no prospect of a recovery in 2010.

It is in agreement with the International Monetary Fund (IMF), which has just issued a clarion call to clean up the EU’s banks before they are hit by a tsunami wave of collapses moving from eastern to western Europe.

The European Bank for Reconstruction and Development (EBRD) is on record as stating that the danger is that West European banks will retreat from Eastern Europe, ‘causing a collapse of the banking sector’ right across the region.

The EBRD and the World Bank have put together a £21bn fund.

This is to be used as an incentive to banks not to let their subsidiaries go to the wall in Eastern Europe without a fight.

However, there are warnings that £21 bn, a massive sum, is not nearly enough to cope with the critical situation that has begun to emerge.

In fact, the majority of bankers are expecting defaults in Eastern Europe in the days ahead while many are predicting ‘systematic meltdown’ throughout Eastern Europe.

Austrian, Belgian, Swedish, German and Dutch banks have almost £1 trillion at risk in Eastern Europe.

Already very large losses are building up in Hungary, the Balkans, Russia and Turkey.

The worst-case scenario that is being touted around is that write-offs will amount to $135bn in Russia, $46bn in Ukraine and $38bn in Kazakhstan.

Already, whole swathes of Russian private industry cannot pay workers their wages after oligarchs such as Deripaska – one of the moving spirits behind the Magna would-be take over of GM Europe – lost tens of billions of dollars in the financial crisis thus far.

With the capitalist world in slump, the Baltic States are heading for a savage deflation, while the Russian leadership has already told the Obama administration that it is planning to cut the percentage of its reserves that are ‘invested’ in US Treasury bonds.

Russia’s reserves have fallen by one third, and of its remaining $404 bn, 30 per cent is in US Treasury Bonds.

This is the news that Gordon Brown and Alistair Darling are shutting their eyes and ears to.

The ‘vision’ or mirage of ‘green shoots’ being sighted was slapped down by, among others, British Airways chief executive Walsh. He responded that airlines are facing their toughest ever trading environment and he hasn’t seen ‘any evidence that it is improving’.

Likewise with the motor car, steel and all manufacturing industries, as well as institutions like the West Bromwich Building Society.

The real situation is that the capitalist crisis is deepening with a further destruction of the productive forces ahead as well as the prospect of new imperialist wars as desperate ruling classes fight it out with each other, for the remnants of the world market.

There is only one way out of the crisis of capitalism and that is through the victory of the world socialist revolution.