NORTHERN Rock (NR) plc is being sold to Virgin Money by the coalition government for £747m. After Northern Rock was nationalised in 2008 it was split in two, Northern Rock plc and Northern Rock (Asset Management), the latter being the bad debt bank that has already cost the taxpayer £21bn.
Virgin Money has agreed not to sack NR plc workers until three years of private ownership. 3,000 workers have been sacked since it was nationalised to make it a more attractive proposition for the private sector. It now has just 2,500 employees.
Taxpayers have already put £1.4bn into NR plc, meaning that Osborne has given away NR plc, making a £650m loss. Saving capitalist banks has proven to be a very expensive business. It has been paid for by massive public sector cuts, and there is no end to it in sight.
Nevertheless, Chancellor George Osborne announced the sale to Virgin Money as an important first step in ‘getting the British taxpayer out of the business of owning banks’.
However, with the banking collapse continuing on a world scale the new private bank could well be bankrupted in the New Year and require yet more public cash.
The Northern Rock crisis began in the US in 2007-8. The shares of US banks were tumbling once again on Wall Street on Wednesday evening after ratings agency Fitch issued a warning over their massive exposure to the eurozone’s mega-debts.
Fitch said that unless the eurozone crisis is resolved soon, the outlook for US banks would worsen. This will have severe consequences for the UK’s banks which will need more public money not less.
The rating agency raised concerns that France could also be drawn into the crisis. The French government’s borrowing costs have begun to rise steeply, on fears that it will not be able to bail out the large economies of Italy and Spain at the same time as bailing out the overstretched French banks.
Moody’s indicated earlier in the month that it might downgrade the French government’s top AAA rating. This would put France in the same trench as Greece and Italy.
Meanwhile, Moody’s has downgraded 12 German banks. Moody’s blamed its decision on the ‘reduced political will in Germany to support future bank bailouts’. The German government will not allow the European Central Bank (ECB) to bail out the Italian government and become the lender of last resort. It is terrified that the ECB would end up in another Weimar situation with money being used as wallpaper.
Spain’s borrowing costs have also risen at its latest bond auction as Spaniards prepare to vote for a new government to tackle its financial crisis.
Opinion polls indicate that the opposition Popular Party will win Spain’s general election on Sunday, ending seven years of Socialist government.
It is expected to result in another EU government of dictatorial, unelected technocrats to impose punishment on the Spanish people. This will be on the Italian and Greek models.
In Italy, Monti, a former EU commissioner, has been officially sworn in as Prime Minister, has appointed himself as Finance Minister and appointed a banker to lead a super-ministry of development, infrastructure and transport. There are no elected politicians in his government. The defence minister is an ex-chief of the general staff.
Italy now has a ‘must do’ dictatorship, brought in to violently break the resistance of the working class. The Greek government has been constructed along the same lines.
Regimes are emerging throughout Europe that have been constructed to deal with further banking and business collapses, by forcing the working class and the middle class to pay the full bill for them.
Britain is being driven down along the same road. Osborne’s sell off of NR plc will end up in yet another bankruptcy, with the need for even more state aid for the banks not less. This will require the use of brutal force against the workers to make them pay for what has to be done to keep the banks open.
There is only one way out of this crisis for the workers of the UK and the EU, and that is to organise socialist revolutions to get rid of capitalism.