As the European Finance Ministers meet in Budapest there will be officially discussing baling out Portugal. This is strange when you come to think of it. Portugal is bust (like Greece and Ireland) and needs a fresh start. This cannot happen with the country weighed down by debt, which it will find it hard to service and impossible to repay. So why are they doing this?
Because if they don’t, they will have, once again, to rescue the banks, because it is the banks who have lent the money willy nilly and whose losses will be unsustainable if Portugal (and Greece and Ireland) default. That will mean an even bigger bank rescue. Moreover the populations of Europe will tolerate, just, baling out a sovereign country, but they will not put up with another bail out of the banks. Not in the U.K. anyway.
If Osborne had to come on T.V. at breakfast, sleepless and stubbled, to say there had been another crisis with the bonus boys and the taxpayers were again having to cough up, he would only be able to say one thing for the government to survive. That all the offending banks had been nationalised in full for £1, with immediate effect their investment departments were separated from their conventional banking departments and the former would be put into liquidation forthwith with total losses to shareholders and shareholding employees. Further, emergency legislation would be introduced to suspend the application of civil law to the entire transaction, which would be treated as a national emergency and incapable of challenge in the Courts.
Oh, no never?
Wait and see. When Mervyn King, the Governor of the Bank of England, says, as he does often, that the banks remain fragile, he means that in the part of their balance sheets showing assets in property and sovereign debt, the figures have no foundation in fact.