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European banks still too big to fail

MEPs from the European United Left/Nordic Green Left European Parliamentary Group have criticised the first annual report of the Banking Union for failing to deal with the structural problems plaguing European banks.  GUE/NGL Co-Shadow Rapporteur on the report, Rina Ronja Kari, explained:

“When the big banks were saved during the financial crisis with taxpayers’ money, it was because the banks had become ‘too big to fail’. If they had not been bailed out, they would have gone bankrupt and pulled the rest of society down with them.  Eight years after the beginning of the financial crisis, the European banking sector is even bigger and even more concentrated. Yet, there is still no legislation that addresses the issue of ‘too big to fail’ banks.”

With the global economic downturn gathering pace, Europe risks a crisis even greater than 2008.  As German MEP Fabio De Masi warns:

“A new financial crisis is looming. The casinos are expanding faster than the real economy because the EU is sliding into a coma and the money of the central banks and the super rich doesn’t know which way to go despite the negative interest rates… The savings and lending business of banks must be separated from the investment banks, so that ‘zombie banks’ can no longer blackmail the taxpayer.  We need a state-backed guarantee scheme for small savers and pensioners, but not for casino banks.”

It is unlikely that UK and US banks are in any better shape than their European counterparts.  So as the global economy goes into recession, there is the potential for the most spectacular banking crash in human history.  With governments in more debt than ever before, we may soon discover whether “too big to fail” might also be “too big to save!”

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