IMF: Eurozone Banks Are In Trouble, Trample Taxpayers and Democracy To Bail Them Out!

Wolf Richter's picture

Wolf Richter

Eurozone nations have to fundamentally reorganize themselves and shift sovereignty away from national parliaments to new layers of centralized, transnational, beyond-control bureaucracies that can decide at will when to extract untold wealth from taxpayers. That’s what the Eurozone has to do, according to the “first ever European Union-wide assessment of the soundness and stability of the financial sector,” released Friday by the institution that the world couldn’t do without, the IMF.

“Financial stability has not been assured,” the report stated flatly about the fiasco in the Eurozone, despite ceaseless hope-mongering by Eurocrats and politicians, and banks remain “vulnerable to shocks.” The report, which never mentioned banks or countries by name, discussed a number of “risks” that could topple these banks, with some of these “risks” already having transitioned to reality:

“Declining growth.” Banks with “excessive leverage, risky business models, and an adverse feedback loop with sovereigns and the real economy” are particularly vulnerable. Hence, most banks. A number of European countries have been in a deep recession, some of them for years. So “declining growth” is a reality, and these “shocks” are happening now, said the IMF in its more or less subtle ways.

Further drop in asset prices.” Real estate prices are now dropping in some countries that didn’t see a collapse during the first wave, including France and the Netherlands—where it already took down SNS Reaal, the country’s fourth largest bank [A Taxpayer Revolt Against Bank Bailouts In the Eurozone]. So hurry up and do something, the IMF said.

The report points at other risks for banks. Pressures in wholesale funding markets could dry up liquidity and tighten refinancing conditions. And the market could lose confidence in the sovereign debt that banks hold. For example, an Italian bank, loaded with Italian government debt, would topple if that debt lost value—but of course, the report refuses to name names.

And in “several countries,” the heavy concentration of megabanks “creates too-big-to-fail problems that could amplify the country’s vulnerability.” So Germany, France, and the UK. Alas, in Europe too-big-to-fail doesn’t necessarily mean big. In tiny Cyprus, fifth country to get a bailout, the banks, though minuscule by megabank standards, are getting bailed out anyway. It’s psychological. A fear. If even a small bank were allowed to go bankrupt, the confidence in all banks across the Eurozone would collapse. That’s how fragile Eurocrats and politicians fear their banks have become—despite their reassurances to the contrary.

And so “policymakers and banks need to intensify their efforts across a wide range of areas” to save these banks, the IMF exhorts these Eurocrats and politicians.

Big priorities: “bank balance sheet repair”; banks should build larger capital buffers to be able to absorb shocks. And “credibility” repair of these balance sheets. In an admission that bank balance sheets still aren’t worth the paper they’re printed on, the IMF calls for stiffening the disclosure requirements, “especially of impaired assets” that are decomposing in hidden-from view basements.

The new Single Supervisory Mechanism (SSM), the EU-wide banking regulator under the ECB, to be operational by early 2014, would have to have real teeth, along with expertise, the IMF pointed out. It should regulate all banks in the Eurozone “to sustain the currency union” and in the entire EU to sustain “the single market for financial services.” In other words, without the SSM, the currency union won’t make it.

But the IMF’s killer app is the Banking Union, a “single framework for crisis management, deposit insurance, supervision, and resolution, with a common backstop for the banking system.” Under this system, taxpayers in all Eurozone countries would automatically be responsible for bailing out banks, their investors, bondholders, counterparties, and account holders in any Eurozone country.

For the most hopeless cases, the Single Resolution Mechanism would step in to dissolve banks “without disrupting financial stability”—hence bail out investors, disrupting financial stability being a term that’s commonly used to justify anything. The medium would be the transnational taxpayer-funded ESM bailout fund; it would bail out banks directly, rather than bail out countries after they bail out their own banks—which is the rule today.

In the process, countries would surrender much of their authority over banks—and how or even whether to bail them out—to this new instrument. Decision makers would be Eurocrats, far removed from any popular vote. Victims would be the people who’d end up paying for it. Investors and speculators would profit. Other beneficiaries would be politicians who’d no longer have to bamboozle voters into bailing out banks because it would be done by a distant power.

The dictum that there is never an alternative to bailouts would be cemented into the system. Democracy, which always gets trampled during bailouts, would be essentially abolished when it comes to transferring money from citizens to bank investors. And that’s of course the ultimate goal of the banking industry.

The stark reality facing millions of Spaniards, Italians, Greeks, and Portuguese is hidden—buried deep under a mountain of economic data, massaged to suit the purposes of the central planners-in-chief. But this is the story of a dying breed: self-made entrepreneurs and small business owners here in Spain. Read.... The Reality Of Doing Business In Spain: A Personal Account.

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shovelhead's picture

I keep waiting for the part in this endless B horror movie where the villagers rise up and hunt down the Vampires that feed on them.

Where is Van Helsing?

Sandmann's picture

It needs an ideology. Communism has failed and Fascism is unfashionable. The problem is that noone knows how to fight the Banks and their Media Machine. IF Apple outspends Blackberry it gets wall-to-wall coverage, but Apple's $2.1 billion Ad Spend has been surpassed by Samsung's $5 billion so they get all the coverage.


Banks have unlimited State Funds plus they have Call Options on MSM Debt so the Propaganda is as effective as in the USSR.

The Masses are docile through fluoride in water and toothpaste and entertainment news. They lack focus because Schooling has destroyed Structured Thought so the cattle are angry and bewildered but lack a firebrand to turn the herd

Element's picture



It’s psychological. A fear. If even a small bank were allowed to go bankrupt, the confidence in all banks across the Eurozone would collapse. That’s how fragile Eurocrats and politicians fear their banks have become—despite their reassurances to the contrary.

Just to point out that 465 US banks have failed since Lehmans went bankrupt.

It's slightly unrealistic for Eurozone pussies to be so psychologically intolerant and inflexible of even one bank failure at this point when clearly thousands of cascading bank failures in Europe are already baked into the cake. Plus what has occurred in the US, so far ... it's just the tip.

Both will be getting a pile-driver up the Khyber pass.

Clowns on Acid's picture

Had to steal from ya to save ya......

JamesBond's picture

Praise Be To The Company!



Seasmoke's picture

They will ALWAYS lie, right up to the very bitter end.

TNTARG's picture

I'm absolutely sick tired of hearing all that talking about "saving banks" meanwhile people is being plundered.

This guys are really looking for it and they're gonna get it. At the end they're gonna have to go to ex-planet-ate to Mars, if you know what I mean.

Element's picture

Gardens love blood and bone fertilizer.

jus sayin

hmmtellmemore's picture

Much of the 'wealth' that is disappearing wasn't real to begin with, just like on Wall Street.  Are politicians trying to bilk their citizens?  No, get real.  They are simply trying their best to keep the capital from vaporizing.  

Do you think a politician wants to show up on TV and be asked "why did you allow 30% of our nation's capital to vaporize?"  If he says "well, in the long run our nation will be healthier for removing the effects of stimulus and bubbles", like Ron Paul would say, he would be fired.

No, they are all desperately trying to keep this fake wealth in their nation, and to do this they need the help of banks.  Its not some evil conspiracy, it is what governments have done for centuries when they are on the verge of losing massive amount of capital.  It won't work for the most part, but they will try anyway.  In the process they will forget they are a nation of laws, and break all of them in an effort to save the capital.  Afterwards, they will cry and say 40 Hail Mary's "I'm sorry, I didn't realize my good intentions for saving our nations capital would cause us so much pain!".

Every 100 years, rinse and repeat.

lindaamick's picture

Every single european in the working class should take all their money out of the banks in whatever way is possible and use cash transactions. 

The ONLY power available to the people is this act. 

f16hoser's picture

shift sovereignty away  //  new layers of centralized, transnational, beyond-control bureaucracies  //  decide at will when to extract untold wealth from taxpayers


Correct me if I'm wrong but, these are very "Disturbing" words.....

squid virtuous's picture

Nothing so wrong that a few re-assuring words from Draghi can't fix... he is preparing at this second...

Radical Marijuana's picture

The remedies are guaranteed to be worse than the diseases!

Greenspan Discusses the End of the Fed ... What Comes Next?

The transnational banksters are getting desperate enough to propose such "solutions." However, we can almost absolutely count on the real problems never being admitted nor addressed in the public spaces which are already so totally dominated by the biggest bullies' bullshit!

Since we live in a globalized, sophisticated slave society, collectively we are incapable of perceiving our problems. Money is backed by murder. The best organized criminals have covertly taken control over governments. The actual death controls that back up the debt controls had a long history whereby the War Kings transformed into the Fraud Kings. Thus, the transnational banksters are becoming a new kind of royalty, that are above the law, and are insulating themselves from the application of the law. The King of Kings of Fraud is the Bank of International Settlements (BIS). That institution's privileges are one of the best examples of how the history of warfare creating the sovereign powers of kings, as well as republics, had those powers transferred by treaties (which most people know nothing about) to the banksters.

What has happened, more and more, is that the covertly used death control powers were systematically able to take over the public death control powers. Thereby, the power of sovereign states were used to enforce the banksters' frauds. That privatized, legalized, and now globalized, counterfeiting of money by the big banks has resulted in a runaway system of social robbery. Almost everything worth robbing has already been robbed.

There are no theoretically possible solutions which do not understand the real nature of the problems. After admitting and addressing those real problems, the only genuine solutions are to operate different murder systems, in order to have a different monetary system, one way or another, sooner or later.

However, what is actually happening is that the transnational banksters are deliberately driving crises, in order to eventually enable them to impose their kinds of solutions, which are intended to consolidate their global hegemony, and continue their almost complete control of Neolithic civilization. Since they have already been able to use force backed frauds to rob everything worth robbing, there are no realistic solutions which do not reverse that degree of social robberies to some significant degree.

As the whole world goes at an exponential rate into overshooting, with the serious risk of collapsing into chaos, after we rush past any saner limits to the ways we are strip-mining the planet in unsustainable ways, THERE ARE NEW SETS OF LIMITS EMERGING, IN THE WAYS THAT HUMAN AND INDUSTRIAL ECOLOGIES ARE EMERGING, IN THE CONTEXT OF THE RUNAWAY DESTRUCTION OF THE NATURAL ECOLOGIES THAT WE USED TO TAKE FOR GRANTED.

Theoretically speaking, the central core concept of ecologies are the death controls. (Of course, those presume that one has some fires of life burning in the first place.) The ways that those things are primarily done today is through the transnational banksters having already taken over control of the sovereign powers of states. That is, the death controls, like the debt controls, have been already almost 99% PRIVATIZED. That PRIVATIZATION of the sovereign powers of governments is the source of the banksters' success.

That PRIVATIZATION of the sovereign powers of nation states, whereby the bigger banksters effectively take over more and more control, is what this article above is discussing.

IF, IF, IF, there is going to be any "democracy" saved, or made to become more real, then there must be more DEMOCRATIZATION OF THE DEATH CONTROLS. Of course, at the present time, that seems like it would require a series of political miracles. Instead, we are on the runaway path towards covertly driven death controls, which have backed up debt slavery becoming debt insanities, finally collapsing into the chaos of death insanities.

Politics should be applied human ecology. However, our ACTUAL human ecology operates through having the vast majority of people acting like Zombie Sheep, directed by a few that act like Vicious Wolves, while there is a range in between of Dogs to Black Sheep. The basic concepts of evolutionary ecology are deliberately excluded from our public politics, as much as possible, because the already established systems depend upon the vast majority of the people being ignorant and/or afraid, so that they can be controlled and exploited, by a tiny minority, which are Wolves in Sheep's clothing.

Therefore, the problems reviewed in articles like this above are reflections of the facts that the vast majority of people are so clueless that they do not have a clue how clueless they are. The Wolves have taught the Sheep to bleat their moralities. The vast majority of people are so brainwashed to believe in bullshit that they feel that they do not want to learn the real social facts about how civilizations actually operate as energy systems.

That is WHY this article above is completely correct when it stated: "The dictum that there is never an alternative to bailouts would be cemented into the system. Democracy, which always gets trampled during bailouts, would be essentially abolished when it comes to transferring money from citizens to bank investors. And that’s of course the ultimate goal of the banking industry."

SubjectivObject's picture

I hope the Tylers are noticing this guys contributions here; (Contributor status?).


knukles's picture

This just sooooo fucked up.

steve from virginia's picture





"banks should build larger capital buffers to be able to absorb shocks. And “credibility” repair of these balance sheets."


The banks will sell more gold to gain 'credibility'. (Actually, banks will suffer more margin calls.)



SamAdams1234's picture

Wait for it..... Guillotines in the square.

shovelhead's picture

Economic progress.

From TBTF to Nobody's Banks can fail.

Finally got rid of that pesky credit event.

Let's celebrate!

We'll hire Benny & the Inkjets for entertainment.

q99x2's picture

Yep the banks are the conduit to transfer all the people's wealth to the banksters.

Who's the enemy of the world? Banksters, Banksters, Banksters they're the ones.

Left right. left right.

Who's the enemy of the world? Banksters Banksters, Banksters they're the ones.

Left right, left right.

Dareconomics's picture

The politicians are attempting to conserve their power.  The eurozone must remain intact, and therefore these bailouts must happen.  Whatever is necessary to execute the bailout is what will occur whether it's legal or not. Deposits will be confiscated, governments financed and of course everything will work out in the end as long the proper forecast is used.

JoeSoMD's picture

Thank you for the link.  It is the authors contention that there probably will be a limited bank run in the short term, and the run will end quickly.  I'm not sure that this will be the case.  There is/was no reason, due to ZIRP, to keep cash on deposit other than the physical security that the banks provided to cash depositors.  The confiscation/tax action has eliminated any reason to keep cash on deposit with a bank.  It appears to be as at risk under the mattress as it is in the bank.

Maybe Cyprus is a special case of some sort.  Comments to other ZH articles have alluded to a link betwen the confiscation and a political attack on Putin.  I don't know Russian politics well enough to understand the link, if in fact there is one.

Finally, I think the politicians, in their attempt to conserve power, as you write above, is a gamble.  The seizure of personal property is an extreme event that could bring citizens out and end the government.  Whether this happens or not would probably depend on the culture of a country.  If Cyprus is a nice weather, laid-back place my guess is that people will just go along for the ride and modify their behaviour slightly.  Maybe the opposite would be true in other countries.  This coming week will provide the answer.

Joebloinvestor's picture

Greeks would have been next, but the money is gone.

SafelyGraze's picture

just got home from central bankers emergency meeting

they make a pretty good case for how to go forward

choice A: print like crazy. 
the money concentrates in the hands of a few, who become increasingly wealthy and powerful. leading to unelected rulers over all things. 

choice B: don't print like crazy. and/or confiscate.
the end of flow means global slave-on-slave massacre and anarchy and massive depopulation. after which, see above re: unelected rulers over all things.

Buck Johnson's picture

Essentially it's damned if you do, damned if you don't.  You see what people and organizations don't understand is that simply doing the act or starting the act of printing/monetizing debt is the trap.  No country or civilization on this planet has ever survived this.  The country will be the same but the govt. will have been destroyed.  You see Bernanke said at first we will print a little and then stop, also buy up our debt to lower interest rates.  But once you go out on that highwire it's too late and the only thing left is to end it and accept the pain that will come even if it means the end of said govt..  Another thing remember when Japan went into it's depression back in 1987 during the implosion of the S&L crisis and the realestate problems back then.

We told Japan they needed to get those bad loans off their books in order to turn their economy around and they still haven't and have been in this depression/decline since then.  But we did the same thing that we told Japan not to do, we didn't want to write all this debt off and such and so we are playing games to keep the banks looking solvent when in reality they aren't.  When this whole system goes down, it will take alot of people and countries with it.

SafelyGraze's picture

about that emergency meeting --

they gave me a message to share, viz: why can't you people just be satisfied with 2 (that is, 10) percent annual price inflation, offset by 5 (that is, 0) percent income on your investments, coupled with increased purchasing based on your increasing (that is, decreasing) wealth held in pension funds (that is, equities)?

ps eat your vegetables. that way we don't have to lift so much damn weight when we "discharge" you from hospice when you turn 80 (that is, 50).

we will call them "birthday discharge" panels

Boris Alatovkrap's picture

Mr. Sheep,

You are very confusing in narrative. You are maybe ideal to write report on Chocolate Rationing for mass consumption by idiot population.



Boris Alatovkrap's picture

FDIC - Fück da ignorant consumer?

WmMcK's picture

Please for meaning also of DIA

(besides Deposit Insurance Agency or Denver Int'l Airport)

jeff montanye's picture

check this shit out.  7% haircut to the poorest bank depositors to pay for the latest bailouts in cyprus.  when will the actual assassinations of the ecb, whatever bureaucrats begin?

Boris Alatovkrap's picture

Boris is to apologize for potty mouth comment, but is cannot find better English word is begin with right letter. Please help to find better word is start with "D". Spasibo!

SAJ's picture

"Deflower" would do nicely.  "Debauch" and "defile" might also serve.

Ochen priyatno.

WmMcK's picture

Director? As in Funeral D. In Charge. Pojalusta!