How Much Did Eurozone States Spend On Bailing Out Private Banks?

This is a link to the Annual Report on the Euro Area 2009, produced by the European Commission. Table 2.1, on P54, caught my attention and is worth reproducing below. It outlines the extent of state intervention/bailout of the banking sector as a percent of GDP for each member state.

As a percentage of GDP the Euro-area average is 25.4%, the EU 27 is 31.2%. This is about 1,870 billion for the entire Eurozone. Nothing compared to what has been allocated to the Greek government. But, get this, Ireland spent a whopping 231.8% of its GDP, massively above any other country. Most of this is accounted for by the blanket guarantee of bank liabilities. Some may legitimately argue that this halted a run on Irish banks. But, as Morgan Kelly argues in this article – it may just end up bankrupting the state.

Euro-area public interventions in the banking sector (as % of GDP) – approved and effective

    • Austria                       32.0                                         8.7
    • Belgium                      92.0                                        26.7
    • Cyprus                        0.0                                           0.0
    • Finland                       27.7                                        0.0
    • France                        18.1                                          5.6
    • Germany                   24.4                                         9.1
    • Greece                        11.4                                         4.6
    • Ireland                       231.8                                     229.4
    • Italy                            1.3                                           0.0
    • Lux                              20.2                                        8.8
    • Malta                          0.0                                           0.0
    • Netherlands            52.0                                        25.4
    • Portugal                    12.5                                         3.3
    • Slovakia                    0.0                                           0.0
    • Slovenia                    32.8                                         0.4
    • Spain                          12.1                                          5.0
    • Euro area                 25.4                                          11.5
    • EU 27                        31.2                                           12.6

    Comparative analysis is the only way to get a grip on the extent of Ireland’s’ financial bailout – the primary cause of our ballooning fiscal deficit. It is not, contrary to public opinion, public sector wages or an increase in social welfare spending that has created the crisis in our public finances. Public sector spending certainly increased, as did overall unit labour costs in the economy (what do you expect in the midst of a colossal property boom fuelled by cheap credit), but not so much as to put the economy in its perilous position.

    If Ireland is going to default and go bust it is the cause of two factors: a massive state bailout of the private finance industry (primarily real estate banking), and a total collapse in revenue due to an over-reliance on regressive and unsustainable (indirect forms) of taxation. Austerity and massive cutbacks will not solve these problems.

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    4 responses to “How Much Did Eurozone States Spend On Bailing Out Private Banks?

    1. Oh god. That is some contrast.

    2. Pingback: Irish Left Review · How Much Did Eurozone States Spend On Bailing Out Private Banks? | Irish Public Policy

    3. Wow, nice find!

    4. Pingback: Irish Left Review · What Does an “Open Economy” Mean & Other Important FAQs

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