Global Economic News
British Banks Are More Bankrupt than Others
June 25 (EIRNS)In a world where all major banks are in reality bankrupt, Her Majesty's banks appear to be far more bankrupt than other banks. The Bank of England has released its twice-yearly Financial Stability Report, in which this appears to be substantiated. For example, the report indicates that the largest British banks will have to raise between £750-800 billion ($1.5 trillion) by the end of 2012. This is more than twice as much as the largest French and German banks, and is 2.5 times more than American banks. That equates to over £25 billion each month on average, more than double the average monthly issuance achieved so far this year. U.K. banks also need to extend the maturity of their wholesale funding, around 60% of which falls due within the next 12 months.
The report also said the banks remain "vulnerable" to further write-downs on their assets. Derivatives and other financial instruments accounted for no less than 40% of U.K. banks' total assets, at the end of 2009. It points out that sovereign debt risk concerns could lead to the reduction of asset prices which "would have a significant impact on the solvency positions of holders of these assets, including both U.K. and global banks."
The BOE report adds that U.K. banks are "particularly exposed" to French and German banking systems, which account for about one-quarter of their claims on banks globally. "U.K. banks face increased counter-party credit risk on exposures to other European banks."
While the U.K. banks hold modest amounts of Portuguese and Greek public and private debt, they are "particularly exposed" to French, German, Irish, and Spanish public and private sector debt, which accounts for about one-quarter of their foreign claims in Europe.
ECB Chief Calls for 'Fiscal Federation' Dictatorship
June 22 (EIRNS)European Central Bank chief Jean-Claude Trichet told the European Parliament's economics committee yesterday that a total takeover of sovereign economies would not be necessary if everyone agreed to a "fiscal federation," with an independent commission to control budget policies in member countries. One is reminded of Keynesian economist Abba Lerner remarking in his debate with Lyndon LaRouche in 1971, that if Germany had followed the advice of Hjalmar Schacht, Hitler would not have been "necessary."
The "independent commission" called for by Trichet would have the power to impose sanctions on countries that insist on keeping their populations alive. Trichet described this plan as a "quantum leap in economic governance."
Trichet said that what was pragmatically possible now was to argue for the equivalent of fiscal federalism based on much stronger surveillance of budgetary and competitiveness policies since a truly federal system would require a change of the European Union's treaties.