The government will use nationalized banking to facilitate loans to companies
“In the end, the Eurogroup always makes the right decision, even after having made all the wrong decisions,” said a European minister these days in Dublin, outside the microphone, paraphrasing Winston Churchill’s phrase about the Americans.
The problem is that Europe is still not right, without coming up with the formula to grow back, recover lost competitiveness and turn around the dramatic unemployment figures. The reality is stubborn and keeps moving away from the complacent analyzes that ministers tend to do about the problems that afflict the European economy and that, if no decisive action is taken, they can end up getting entangled.
It is the severe diagnosis that the European economy ministers have had to listen to, gathered at their informal spring meeting in the Irish capital. And not precisely through the mouths of any anti-system movement or marginal economist …
The European strategy
The measures adopted “have been unable to increase the growth potential” of the eurozone. Now, “this failure is mixed with the danger that short and medium term challenges interact with those of the long term” and undermine the behavior of the European economy. The EU has acted in this crisis by adhering to the established rules; “This is valid for normal times, but not for the current quagmire”.
These are some of the conclusions that the economists Zsolt Darvas and Jean Pisani-Ferry -from the Brussels think tank Bruegel-, invited to Dublin by the EU itself, have transmitted to the ministers after analyzing the growth problem that Europe is dragging and that the boom of the early years of the euro capped. The problems are still there and “can not be seen as cyclical,” warned Darvas and Pisani-Ferry.
The economic stagnation has overwhelmed the European economy ministers, who have devoted part of their meeting in Dublin to analyze the situation from different reports, now that unemployment has reached the record figure of almost 19 million people in the EU. Some look at the other side of the Atlantic in search of solutions.
Michael Noonan, Irish Minister of Finance, proposed studying the United States model to reduce the dependence of businesses on banks. While private companies obtain only 25% of their external financing from banks, in Europe the opposite situation occurs: companies need them to obtain 75% of their loans. This dependence is fatal in a situation like the current one, where one in four European banks is damaged and depends on public aid, according to Bruegel data.
“There is a general consensus that we must take tangible steps to develop a more balanced financial model, in which everyone – banks, institutional investors and public authorities – are responsible for supporting investments in growth and employment,” Noonan summarized. a host of the European meeting. The Irish Government, like the Spanish, denounced the problems of SMEs to access credit.
For Spain, the key is to reactivate credit to the private sector, for which calls for an intervention by the European Central Bank. who has stated that he is “reflecting” on how to facilitate the situation of companies. While that solution arrives, the Government of Mariano Rajoy is determined to use nationalized Spanish banks (Bankia, Catalunya Banc, and NCGalicia) to stimulate the real economy and facilitate loans to SMEs. Bankia already would be “scratching” market share to other entities thanks to this strategy, point sources of the Spanish Executive. Another idea that is being considered at European level is to increase the attractiveness of loans to SMEs for banks by accepting them in better conditions as collateral to the ECB to obtain liquidity, something that is considered to be done through guarantees that could be issued by the European Investment Bank , with the help of national central banks.
a think-tank financed by EU states and private capital – recommend “that much stronger measures be taken than hitherto” to correct the situation: to clean up the financial sector, to create a genuine banking union, to soften the pace of fiscal adjustment, promote economic reforms in exchange for aid and give more European funds to the countries of the South.