2007-2017: Causes of a Ten-Year Financial Crisis

30 March by Eric Toussaint

The first institutions specializing in mortgage Mortgage A loan made against property collateral. There are two sorts of mortgages:
1) the most common form where the property that the loan is used to purchase is used as the collateral;
2) a broader use of property to guarantee any loan: it is sufficient that the borrower possesses and engages the property as collateral.
loans started to default in the US in February-March 2007.

According to a report published by the Union of Swiss banks (UBS) in March 2017, “between 2002 and 2008, global debt of the corporate, household, government and financial sectors increased by 55% of global GDP GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
.” Two thirds of this increase can be traced to banks’ growing debts. Between 2008 and 2017, global debt rose a further 51% of global GDP. But since 2008, banks (especially in the US) somewhat reduced their debts while the debts of governments, that had bailed them out, soared to new heights. |1|.

The roots of the current international crisis that began in the United States in 2007-2008 go back to economic and political activities in the 1990s. First, there was overproduction in the real estate (property) market and other sectors of the economy, particularly the automobile industry. Then there was the overdeveloped financial sector, especially the banking sector, and its deregulation. Next came the way bank CEOs acted, and the massive increase in private debt. Finally, the US Central Bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

ECB : http://www.bankofengland.co.uk/Pages/home.aspx
(the Federal Reserve FED
Federal Reserve
Officially, Federal Reserve System, is the United States’ central bank created in 1913 by the ’Federal Reserve Act’, also called the ’Owen-Glass Act’, after a series of banking crises, particularly the ’Bank Panic’ of 1907.

FED – decentralized central bank : http://www.federalreserve.gov/
, often known as ‘the Fed’) and government policy encouraged the development of a speculative bubble Speculative bubble An economic, financial or speculative bubble is formed when the level of trading-prices on a market (financial assets market, currency-exchange market, property market, raw materials market, etc.) settles well above the intrinsic (or fundamental) financial value of the goods or assets being exchanged. In such a situation, prices diverge from the usual economic valuation under the influence of buyers’ beliefs. in the real estate sector for economic and political reasons. Indeed, George W. Bush championed the ownership society in his 2004 re-election campaign:

We’re creating [...] an ownership society in this country, where more Americans than ever will be able to open up their door where they live and say, welcome to my house, welcome to my piece of property. |2|

In his memoirs, written just after the crisis that erupted in 2007, Alan Greenspan confirmed that there had been a policy strategy underlying the attitude adopted by the Federal Reserve, which supported Bush’s policies:

I was aware that the loosening of mortgage Mortgage A loan made against property collateral. There are two sorts of mortgages:
1) the most common form where the property that the loan is used to purchase is used as the collateral;
2) a broader use of property to guarantee any loan: it is sufficient that the borrower possesses and engages the property as collateral.
credit terms for subprime borrowers increases financial risk, and that subsidised home-ownership initiatives distort market outcomes. But I believed then, as now, that the benefits of broadened home-ownership are worth the risk. Protection of property rights, so critical to a market economy, requires a critical mass of owners to sustain political support.

As we will see, the Bill Clinton and George W. Bush administrations gave systematic support to the big banks, which wanted to do away with the disciplinary constraints imposed on them by Roosevelt in the 1930s that prevented them from doing business exactly as they pleased.

The crisis was triggered by a speculative real estate bubble. Before it burst, it had driven up the price of real estate, |4| and brought about an excessive increase in the construction sector compared to solvent demand. The number of new housing units built each year surged from 1.5 million in 2000 to 2.3 million in January 2006. A growing proportion of new housing units went unsold, even though the banks were offering easy lending conditions to potential buyers, and despite the encouragements of the US authorities.

This overproduction ultimately caused a sharp drop in real estate prices. The expectations of households that had taken on subprime |5| mortgages were shattered by this radical change of circumstances. In the US, households generally refinance their home loans every two or three years when real estate prices are rising in order to obtain a lower-interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. loan. For subprime loans, the interest-rate for the first two or three years was low (about 3%), while as of the third or fourth year, not only did the rate increase substantially (up to 8 or 10%), but it also became variable, and in many cases reached 14 or 15%.

In 2006, when the price of real estate started dropping, households with subprime loans could no longer refinance their mortgages on favourable terms.
As Paul Jorion writes in La crise du capitalisme américain (The Crisis of American Capitalism), subprime loans were really aimed at

[…] seizing the savings of the unfortunate, who aspired to the ‘dream’ but did not really have the financial means to achieve it. The first of these were the Black and Latino populations. There were many clever tricks, ranging from written agreements that differed from the verbal agreements to offers that drove the beneficiaries to bankruptcy so that their homes could be repossessed, and refinancing agreements presented as favourable, whereas they were in reality catastrophic. |6|

A few years later, lawsuits filed by the hundreds of thousands of families that had been illegally evicted by the banks would show that the bankers had massively defrauded their clients. In over 500,000 cases examined by the US Department of Justice, banks were found to have deliberately misled the people who had signed mortgage contracts. As we will see in Chapter 21, after long negotiations relating to the crimes and offences they had committed involving mortgages, the leading US banks finally agreed to pay fines amounting to approximately $86 billion (for 2008-2013). |7| By paying these fines, the banks were able to avoid legal sanctions, but the payments are the proof that they played a role in the crisis.

A Wall Street Journal study shows that the high-rate subprime mortgage market touched not only low-income Americans, but also affected the middle class. For example, the WSJ writes about a photocopy shop owner who had bought a house in Las Vegas for $460,000 in 2006. In 2006-2007, she had to make monthly instalments of $3,700 with an interest-rate of 8.2%, but in 2008, the monthly payments rocketed to $8,000 with an interest-rate of 14%. Meanwhile, because of the crisis, her home dropped in value to $310,000 (the value of real estate dropped by 30% in 2007). |8| She stopped paying her mortgage and lost the home of her dreams.

In early 2007, an increasing number of households started defaulting on their loans. Between January and August 2007, 84 mortgage companies in the US went bankrupt. The companies and wealthy households that had speculated on rising real estate prices, making juicy profits in the process, suddenly withdrew from the market, which made prices drop even more dramatically. Those banks that had invested their mortgage claims in structured products and sold them on a large scale (in particular to major European banks craving for high-yield Yield The income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value. products) were at the heart of the crisis.

The giant edifice of private debt began to collapse when the speculative bubble burst in the US real estate sector. This event was followed by similar crises in the real estate sector in Ireland, the UK, Spain and Cyprus, as well as in several countries in Eastern and Central Europe, and since 2011-2012 in the Netherlands.

In France, Nicolas Sarkozy |9| followed George W. Bush’s example when he suggested that French people should take on more debt. In the April 2007 issue of Revue Banque, he wrote:

Today, French families are the least indebted in Europe. But an economy with insufficient debt is an economy that lacks confidence in the future and doubts itself. That is why I would like to open up more opportunities for mortgages, with state guarantees Guarantees Acts that provide a creditor with security in complement to the debtor’s commitment. A distinction is made between real guarantees (lien, pledge, mortgage, prior charge) and personal guarantees (surety, aval, letter of intent, independent guarantee). in case of illness. (…) If home loans were easier to get, the banks would be less concerned by the credit quality of the borrowers, and would pay more attention to the value of the mortgaged property. (Translation CADTM.)

It is easy to imagine what would have happened in France if the subprime mortgage crisis Subprime mortgage crisis This was the crisis that started in the US in 2007 involving subprime mortgages, considered to carry the highest risk. It triggered the 2007 – 2011 financial crisis. The suspicion it cast on securitized debts that included part of these loans meant that financial institutions lost confidence in each other, leading to the crisis. had not broken out in 2007-2008, and if Sarkozy had continued promoting the model being applied in the US.

The interpretations generally given by the major media outlets in 2007-2008 when the crisis erupted in the US were inadequate or patently deceitful. They constantly repeated that the economic chaos was due to the irrational behaviour of poor Americans who had taken on too much debt to buy homes that were beyond their means. These explanations failed to mention the overwhelming responsibilities of US authorities and bank CEOs.

After Lehman Brothers went bankrupt in 2008, the dominant discourse focused on the pariah of the financial world, Bernard Madoff, who had organised a $50 billion scam, and Richard Fuld, the CEO of Lehman Brothers, who were supposedly undermining the righteous functioning of capitalism.

The current crisis erupted when the speculative real-estate bubble burst; however, our analysis should not stop there, as Karl Marx reminds us:

The years 1843-5 were years of industrial and commercial prosperity, a necessary sequel to the almost uninterrupted industrial depression of 1837-42. As is always the case, prosperity very rapidly encouraged speculation. Speculation regularly occurs in periods when overproduction is already in full swing. It provides overproduction with temporary market outlets, while for this very reason precipitating the outbreak of the crisis and increasing its force. The crisis itself first breaks out in the area of speculation; only later does it hit production. What appears to the superficial observer to be the cause of the crisis is not overproduction but excess speculation, but this is itself only a symptom of overproduction. The subsequent disruption of production does not appear as a consequence of its own previous exuberance but merely as a setback caused by the collapse of speculation. |10|

Inspired by Marx’s succinct analysis made more than 150 years ago, the chain of events leading up to the current economic crisis in the US may be outlined as follows: low growth in the 1980s and a stock-market Stock-exchange
The market place where securities (stocks, bonds and shares), previously issued on the primary financial market, are bought and sold. The stock-market, thus composed of dealers in second-hand transferable securities, is also known as the secondary market.
crash in 1987 (Reagan Administration) followed by growth in the second half of the 1990s (Clinton Administration), which was boosted by a speculative bubble on the stock market mainly driven by new technology (IT) and energy brokerage companies like Enron. The bubble burst in 2000, and was followed by an aggressive low interest-rate policy implemented by the Federal Reserve to jump-start the economy without cleaning it up. As a result, a real estate bubble emerged (as desired by the George W. Bush Administration and the Federal Reserve for economic and political reasons). |11| All of this took place in a context in which the derivatives Derivatives A family of financial products that includes mainly options, futures, swaps and their combinations, all related to other assets (shares, bonds, raw materials and commodities, interest rates, indices, etc.) from which they are by nature inseparable—options on shares, futures contracts on an index, etc. Their value depends on and is derived from (thus the name) that of these other assets. There are derivatives involving a firm commitment (currency futures, interest-rate or exchange swaps) and derivatives involving a conditional commitment (options, warrants, etc.). market was exploding, and with banking and stock-market euphoria that hid the overproduction in the real estate and automotive sectors in the US for a while. When the real estate bubble burst in 2006-2007, the house of cards of private debt held by banks collapsed. |12| Central banks and governments then decided to implement a policy based on massive cash injections and low interest-rates, which started new speculative bubbles. Banks and companies in general did not clean up their financial practices, and started a massive reduction of jobs, resulting in a major increase in unemployment. The policies put in place also contributed to attacks on wages and social rights. Finally, governments engineered the explosion of public debt destined to help the major private banks and implemented policies that favoured big capital.

To return to the crisis that started in 2007-2008 in the United States and Europe, the collapse of the edifice of subprime loans and structured products created since the mid-1990s had very serious effects on production in various sectors of the real economy. Austerity policies then plunged the economies of the most industrialised countries into a period of prolonged recession and depression from which they have not yet emerged.

The impact of the US real estate crisis and the banking crisis that followed had an enormous effect, because many European banks had invested heavily in US structured products and derivatives. As these products had been developed, sold and bought by the same major international banks, this connected them, exposing them to the same risks and making them vulnerable to the same impacts. From the mid-1990s, the huge quantity of these products, on and off the banks’ balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. sheets, caused a local crisis (a US real estate bubble) to develop into an international financial and economic crisis.

Starting in the 1990s, growth in the US and several European economies was sustained by overdevelopment of the private financial sector and a formidable increase in private debt (household debt |13| and debt from financial and non-financial corporations Non-financial corporations All economic agents that produce non-financial goods and services. They represent the greatest share of productive activity. ). At the same time, there was a downward trend in public debt from the mid-1990s to 2007-2008.

This chart shows very clearly that not only are the poor indebted, but rich households are responsible for much of the increase in debt, to which we should add the debts of both non-financial and financial corporations (banks, investment funds Investment fund
Investment funds
Private equity investment funds (sometimes called ’mutual funds’ seek to invest in companies according to certain criteria; of which they most often are specialized: capital-risk, capital development funds, leveraged buy-out (LBO), which reflect the different levels of the company’s maturity.
, etc.), which have become gigantic (see table below). Low-income households increasingly financed their consumption through debt to compensate for the stagnation or drop in their wages. The debt of the poorest 20% of households rose by 90% between 2000 and 2008, making them the natural target of the subprime lenders.

Yet if we look at the mass of loans, the richest 20% contributed half of the increase in household debt recorded between 2000 and 2008. The debt of the richest 20% rose by nearly $2,200 billion, whereas the increase for the poorest 20% was only $178 billion, or only a twelfth of that of the richest 20%. This is very instructive: the rich became indebted in order to speculate, mainly on the stock market and in the real estate sector by buying housing and commercial premises that they did not live in or use. |14| These rich households (and the companies they controlled) speculated on the rise in real estate prices. Alan Greenspan implicitly recognises this himself. He wrote in his memoirs that 25% of house purchases in 2005 were made by investors, not by ‘subprime’ families, |15| which contributed greatly to the creation and bursting of the speculative bubble.

It is important to bear in mind the unequal distribution of wealth in the US as in other highly industrialised countries. In 2010, the richest 1% held 35% of the total wealth of the US. In broad terms, this corresponds to the capitalist class, which holds an impressive concentration of wealth. The richest 10% possessed 70% of total wealth. This additional 9% represents the entourage of the capitalist class, or their allies in the broad sense. The remaining 90% had to make do with 30% of the wealth, and the poorest 50% possessed only 5%. |16|
Private debt in the US constantly increased between 1980 and 2008. Households financed their expenses by borrowing more and more – the poor to compensate for the drop in their income, and the rich to make even more money from their increased income through the magic of ‘leveraging’ (see Chapter 4). The debts of banks and other financial corporations grew exponentially (an increase of more than 600% in 28 years). Public debt, which had risen considerably during the 1980s after the Fed increased interest-rates in 1979, and the bailing out of Savings and Loan banks, |17| fell during the 1990s (during the Clinton Administration) and started to increase again between 2000 and 2008 during the George W. Bush Administration. At this point, public debt represented less than one sixth of total debt and less than one fifth of private debt.

United States: Total debt and debt by institutional sector 1980-2008
(as a percentage of GDP GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.

Source : Michel Aglietta using the Fed Flow of Funds statistics |18|

Meanwhile, in Europe, commensurate with the overdevelopment of the private financial sector, the volume of assets of private European banks surged excessively in the 1990s to reach €42,100 billion in 2007 (more than three times the GDP of the 27 EU member countries). |19| In 2007, the debt of Eurozone private banks (accounted for in the volume of liabilities Liabilities The part of the balance-sheet that comprises the resources available to a company (equity provided by the partners, provisions for risks and charges, debts). ) was also three times the GDP of the 27 member countries. |20|

The gross debt Gross debt This concept does not include government assets. The debt in the terms of the European Stability and Growth Pact (SGP) is a consolidated gross debt, meaning that it does not take into account either public assets or debts between public administrations. To take the example of a household of several people, the household’s debt, as understood in SGP terms, would be the sum of the total debt of those people but would not count any sums that they might have lent one another. Nor would the debt be reduced by the value of goods that belonged to the household, such as their car or their house. of the Eurozone member states was 66% of their GDP in 2007. |21| Specific information for Spain and Greece is given below:

Gross debt of financial sector in % of GDP in 2007 Public debt in % of GDP in 2007
Greece 239% 108%
Spain 162% 37%
Euro Zone 309% 66%

The pump was primed for the private debt crisis to become a public debt crisis.

This is clear in the following table and the charts that illustrate it. The table shows that public debt in the Eurozone had started to fall between 2000 and 2007. The reduction in public debt was particularly significant in Spain. On the other hand, the debt of financial corporations (banks) continued to grow, in the Eurozone as a whole but especially in Spain, Portugal and Greece. The same was true of the debts of households and non-financial corporations. Everywhere, the increase in public debt was significant and sudden after 2007, due to the crisis and government bank bailouts.

Debt by sector as a percentage of GDP

Euro Zone200020072011
Gross Public Debt 68 66 82
Household debt 49 54 61
Non-financial corporations’ debts 76 87 96
Financial corporations’ debts 232 309 333
Gross Public Debt 58 37 62
Household debt 46 83 81
Non-financial corporations’ debts 60 116 118
Financial corporations’ debts 137 162 203
Gross Public Debt 49 63 96
Household debt 59 84 93
Non-financial corporations’ debts 97 112 123
Financial corporations’ debts 349 266 306
Gross Public Debt 104 108 162
Household debt 14 42 56
Non-financial corporations’ debts 42 53 58
Financial corporations’ debts 200 239 311

Contrary to the declarations made by European leaders and the mainstream press, which contend that States’ debts are too high because of insufficient control of social spending, the increase in European public debt occurred after private organisations (principally businesses and banks) had become overly indebted. The causes of this excessive debt include:

The cost of bailing out the banks

Table below gives the total volume of bail-outs, assistance, and guarantees to banks made by government authorities between 2008 and 2012. The sums in the guarantees column are not expenditures, they are State guarantees. Should the concerned assets lose their value, the State will cover the losses. They are not immediate costs, but potential future losses.

Direct public assistance to banks (from 2008 to 2012, in % of GDP) and State guarantees (in 2013, € billion): European Union |22|

Country Direct public aid to banks ($ billion) Direct public aid to banks (% of GDP) Public guarantees to banks ($ billion) Public guarantees to banks (% of GDP)
Ireland 63,0 38,4 66,4 40,5
Greece 35,1 19,3 73,7 28,1
Cyprus 1,7 10,1 6,7 6,1
Belgium 23,72 6,2 155,0 11,9
Spain 58,3 5,7 414,3 9,3
Denmark 11,0 4,4 100,8 0,5
UK 80,0 4,3 ...
Portugal 6,8 4,1 67,1 9,9
Netherlands 18,7 3,1 244,1 2,7
Austria 9,4 3,0 126,8 2,4
Germany 65,7 2,4 1108,7 1,8
France 24,7 1,2 834,2 3,3
Italy 6,2 0,4 631,8 5,2
Total EU at 28 601,2 4,6 5292,8 3,9

Financial time bombs on those states’ accounts, not only the losses are socialised but also the risks The UK is at the top of the list for public aid to banks (€80 billion), followed by Germany (€65.7 billion). However, the country that has the heaviest burden compared to the size of its economy is Ireland with 40% of GDP. Ireland is followed by Greece at 19%, Cyprus 10%, and Belgium |23| and Spain at around 6%.

Figures from 2013, the latest available, point to Spain as the country that has granted the highest total of guarantees (€95.1 billion), followed by Italy (€81.1 billion) and France (€65 billion). Nevertheless, Ireland and Greece remain the most heavily burdened by guarantees compared to the size of their economies (respectively 40% and 28%). These are financial time bombs on those states’ accounts, not only the losses are socialised but also the risks (in this case, banking risks).

In 2017, public finances in Italy, i.e. in the third biggest economy in the euro area, are most vulnerable to the poor condition of Italian private banks.

To conclude: Between 2008 and 2017, public debt rose sharply as a consequence of bank bail-outs and of neoliberal austerity policies. It is essential to insist on the causes of and responsibility for the increase in public debt. Indeed in the near future, in the ideological struggle, right-wing forces will lay the blame for the current crisis on public expenditure.

This text is an extract from Bankocracy, Éric Toussaint, ADEN editions and CADTM co-édition, Brussels, 2014, 455 pages. Available here.

And from the 2015 World debt figures available online and on order.


|1| UBS, Global Economic Perspectives Is the debt super-cycle finally over?, march 6th, 2017, 15 pages.

|2| Naomi Klein, ‘Disowned by the ownership society’, The Nation, February 18, 2008, www.thenation.com/article/di....

|3| Alan Greenspan, The Age of Turbulence, New York: Penguin Books, 2007, p. 258.

|4| From 2001 to 2007, the price of real estate doubled in the US.

|5| ‘Subprime’ designates mortgages that are riskier for the lender (but with a higher yield) than prime loans.

|6| Paul Jorion, ‘Inédit : les 3 premières pages de ‘La Crise du capitalisme américain’ (Unpublished: the first three pages of La Crise du capitalisme américain - The Crisis of American capitalism), 23 February 2012, http://www.pauljorion.com/blog/?p=34264 (in French).

|7| SNL, ‘Credit crisis and mortgage-related settlements for select bank holding companies’, http://www.ababj.com/images/Dev_SNL..., accessed 22 February 2014.

|8| Eric Toussaint, Bank of the South. An Alternative to IMF-World Bank, Mumbai: Vikas Adhyayan Kendra, 2007.

|9| President of the French Republic from 2007 to 2012.

|10| Marx-Engels, ‘Review: May-October 1850,’ Neue Rheinische Zeitung, https://www.marxists.org/archive/ma...

|11| Alan Greenspan recognises that by radically lowering interest-rates to get out of the crisis, ‘We were willing to chance that by cutting rates we might foster a bubble, an inflationary boom of some sort, which we would subsequently have to address’. He adds that: ‘Consumer spending carried the economy through the post-9/11 malaise, and what carried consumer spending was housing.’ Greenspan explains that the government encouraged the development of the subprime market. Alan Greenspan, op. cit., p. 229.

|12| At the same time, speculation increased, first on raw materials and food staples (see Chapter 17).

|13| Household debt includes debts incurred by American students to pay for their studies. Student debt reached $1 trillion in 2011. By way of comparison, this colossal sum is higher than the total external public debt of Latin America ($460 billion), Africa ($263 billion) and southern Asia ($205 billion). For the size of the debts of these ‘continents’, see Damien Millet, Daniel Munevar, Eric Toussaint, World Debt Figures 2012, CADTM, 2012, Table 7, http://cadtm.org/2012-World-debt-figures.

|14| Unlike low-income families, who took out loans to buy their homes.

|15| Alan Greenspan, op. cit.

|16| Eric Toussaint, ‘What can we do with what Thomas Piketty teaches us about capital in the twenty-first century?’, CADTM, 24 February 2014, http://cadtm.org/What-can-we-do-wit....

|17| In the 1980s, the Savings and Loan associations (S&L), American financial institutions specialising in savings and housing loans, multiplied their high-risk investments in real estate and invested heavily in junk bonds (in particular with Drexel Burnham Lambert). In all, more than 1,600 banking institutions and S&Ls went bankrupt. The bailout cost American taxpayers more than $250 billion.

|18| Repris de François Chesnais, Les dettes illégitimes (Illegitimate debt), Paris: Raisons d’Agir, 2011, p. 70.

|19| Damien Millet, Daniel Munevar and Eric Toussaint, 2012 World Debt Figures, CADTM, 2012, Table 30, p. 23. This table is based on the data of the European Banking Federation, http://www.ebf-fbe.eu/index.php?pag.... See also Martin Wolf, ‘Liikanen is at least a step forward for EU banks’, Financial Times, 5 October 2012.

|20| A bank’s debts must not be confused with its assets. Debt is part of a bank’s ‘liabilities’. In an accounting balance-sheet – a document that summarises at a given moment what the company owns, its ‘assets’ (land, buildings, etc.) and its resources or ‘liabilities’ (capital, reserves, credits, etc.) – the assets and liabilities must be equal. A company’s money comes from somewhere (liabilities), and goes somewhere (assets). Hence, assets are always equal to liabilities.

|21| Damien Millet, Daniel Munevar and Eric Toussaint, 2012 World Debt Figures (op. cit.), Table 24, p. 18. Sources: Morgan Stanley research database: http://www.ecb.int/stats/money/aggr..., and Bank of Greece, ‘Aggregated balance-sheets of monetary financial institutions (MFIs)’, http://www.bankofgreece.gr/Pages/en....

|22| The figures in the direct public aid column do not include guarantees (mentioned in the public guarantees column) or ECB lines of credit.
GDP data from: European Commission/ Eurostat,
Tableaux complémentaires relatifs à la crise financière, 2007-2012, April 2014, http://epp.eurostat.ec.europa.eu. (French) From Manzano, Daniel La banca euroea y su recapitalización pública, El País, 17 September 2014. Available at http://blogs.elpais.com/finanzas-a-las-9/2014/09/la-banca-europea-y-su-recapitalizaci%C3%B3n-p%C3%BAblica.html (Spanish).
Guarantee data from: European Commission, Overview of decisions and on-going in-depth investigations in the context of the financial crisis, MEMO/14/507, 13 August 2014. http://europa.eu/rapid/press-release_MEMO-14-507_en.htm?locale=en.

|23| CADTM has calculated a figure for Belgium considerably higher than the one mentioned in Table 5.2. Our figure is €32.6 billion, 8.5% of GDP, higher than the official figure of €23.7 billion. The CADTM calculations are based on figures from SFP finance and the Belgian national audit office, and are as follows (€ billion): bail-out of Dexia (8.9) + Fortis (15.2) + KBC (7) + Ethias (1.5) = €32,6 billion. In the case of Belgium, and certainly in other cases as well, official figures underestimate the real value of public aid to banks.

Concerning debt linked to bank bail-outs see: Cravatte, Jérémie. Pourquoi la dette liée aux sauvetages bancaires est-elle illégitime?, CADTM, 3 September 2013, http://cadtm.org/Pourquoi-la-dette-liee-aux (French).


Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France. He is the author of Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012 (see here), etc. See his bibliography: https://en.wikipedia.org/wiki/%C3%89ric_Toussaint He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. Since the 4th April 2015 he is the scientific coordinator of the Greek Truth Commission on Public Debt.

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