Europe's youth left in the lurch

Under the old capitalist economy, no enterprise would run without capital adequate to its need.

At the last summit of European heads of state in Brussels at the end of June, the main theme was youth unemployment, which has now reached 23 per cent of European youth (although it stands at 41 per cent in Spain). Last year, the International Labour Organisation issued a dramatic report on Global Employment Trends for Youth 2012 in which it spoke of a ‘lost generation.’ According to projections, the generation currently seeking to enter the market place will retire with a pension of just 480 euro­ if it actually succeeds in entering the market ­ because of temporary jobs without social contributions.

After long discussions, Europe’s leaders decided to allocate six billion dollars of European money, to fight youth unemployment. After much shorter discussion, they decided to allocate up to 60 billion dollars to support Europe’s banks. This, on top of the striking subsidies already received: the European Central Bank alone has given one thousand billion dollars to the banks at nominal cost.

Popular feelings

All the efforts to create a European banking system under a central regulator are now on hold until the German elections in September. As a member of the German delegation at the June summit is reported as saying: ”We know well what we are supposed to do, to calm financial markets. But we are not elected by financial markets, we are elected by German citizens” And of course, no effort has been made to explain to Germany’s citizens why it is in their interest to show economic solidarity with the most fragile countries of Europe. Democracy, as it is understood today, is based on leaders who follow popular feelings not on leaders who feel their duty to push their electors towards a world of vision and challenges.

The summit was also obliged to accept the blackmail of British prime minister David Cameron: either you maintain the subsidies that then prime minister Margaret Thatcher obtained in 1973, when you insisted that we join Europe (which makes Britain a net recipient of European money), or we will block the European budget.

This is because the anti-Europe electorate in Britain is growing and Cameron could not afford to appear weak. But Cameron was one of the strongest proponents of the subsidy for the banks, and no wonder: the financial system now accounts for 10 per cent of the British gross domestic product (GDP). It is a very curious situation, in which not only has Europe spent several hundred billion dollars for its banks, it has even invited the International Monetary Fund (whose controlling member is the US) to join the European Institutions and manage the European crisis.

Nevertheless, what is common to the three most powerful players in the West (US, Europe and Japan) has been their inability ­ and unwillingness ­ to place banks under control and react to their strings of crimes. Central bankers from the entire world join in the Bank for International Settlements (BIS) based in Basel. Now its Basel Committee on Banking Supervision has come up with a proposal that would tighten the relationship between the capital of the banks and the volume of financial operations they can afford. One of the proposal’s indicators establishes that banks must maintain high-quality capital, like stock or retained earnings, equal to 7 per cent of their loans and assets and that the biggest banks may be required to hold more than 9 per cent.
Under the old capitalist economy, no enterprise would run without capital adequate to its need. Today we have a new branch of economy, which wants to play without capital, and expects the state to bail it out if anything goes wrong.

So, let us just look briefly at how many times things went wrong without anybody ever going to jail.On 28 April 2002, the U.S. Securities and Exchange Commission (SEC), won a lawsuit ordering 10 banks to pay 1.4 billion dollars in compensation and fines because of fraudulent activities. One year later, the SEC discovered that 13 out of 15 financial institutions randomly investigated were guilty of fraud. In 2010, Goldman Sachs agreed to a fine of 550 million dollars to avoid a trial for fraud. In July last year, the US Senate presented a 335-page report on the British bank HSBC. Over the years it helped drug dealers and criminals recycle illicit money. The fine was 1.9 billion dollars.

The millions of young people who see no future in their lives? It’s the old story: if you steal bread, you go to jail, but if you steal millions, nothing will happen to you … and if you steal millions in a bank, even less reason to worry. Meanwhile, back at the summit table, the priority for survival is to allocate taxpayers’ money, even if all talk about youth unemployment. After all, what really matters is that we must be all re-elected.

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