The Financial Crisis Pushes Europe to the Brink of Disaster

By Danny Schechter, AlterNet. Posted March 12, 2009.

Because of globalization and the interwoven nature of the world economy, what is happening there will make things worse for us here.

Reuters reports: "A new report suggesting Eastern Europe's economic slump will drag Western banks further into the red fanned fears that emerging economies will deepen the recession in the West. No wonder international agencies are up in arms."

One issue that is just getting attention in Europe is the enormous amount of  unregulated activity by hedge funds that control huge amounts of money stashed in untaxed offshore accounts. European leaders have now agreed a tough stance on hedge funds, the highly speculative products that many blame for fueling instability in financial markets.

Another major issue involves Swiss Banks. U.S. tax authorities demanded the names of 52,000 Americans banking in secret accounts to evade taxes.

Bloomberg reports:

In the past two weeks, Finance Minister Hans-Rudolf Merz said he’s willing to collect taxes on offshore accounts for the U.S., and Justice Minister Eveline Widmer-Schlumpf offered cooperation on some cases of tax evasion.

"That’s de facto abolishing banking secrecy," said Regula Staempfli, a Swiss political scientist in Brussels, Belgium.

There is also a darker dimension, with reports that legitimate businesses are turning to the Mafia and organized crime gangs for the billions they need to stay in business.

Douglas Farah writes in the Counterrorism blog:

There is strong anecdotal evidence that cartels from South America to Southeast Asia and Europe … are stepping into credit breach, building relations with businessmen desperate to stay in business, who would not normally look to the "informal" economy for a loan.

This will serve to extend the tentacles of these groups even further into the legal society and financial structure. As (one) article notes, "Stronger organized crime means a weaker state."

A story in the Washington Post says:

A new report estimated that organized crime syndicates in Italy -- including Naples' Camorra, Sicily's Cosa Nostra, Calabria's 'Ndrangheta -- collect about 250 million euros, or $315 million, from retailers every day. That is about a billion dollars every three days, or about $122 billion a year siphoned out of a single economy. Is it any wonder Italy is a constant economic wreck?

If trends continue, there is likely to be more opportunities for the criminal class and more of a fusion between the supposedly legitimate business world and the supposedly illegitimate one.

Tony Soprano, are you paying attention?

Regulators are also monitoring missing money. From the Financial Times: "Lehman Brothers' U.S. liquidators have asked Barclays to explain what happened to an estimated $3.3 billion earmarked for bonuses and other liabilities that the U.K. bank received when it acquired part of the bankrupt Wall Street company last year."

Funny business like this seems to be part of the way this business is run.

Increasingly, banking bosses are sounding like mob underbosses. Here’s a quote attributed to Jimmy Cayne, former chief of Bear Stearns about Tim Geithner, who engineered the sale of his bank to JP Morgan at a sizable loss:

The audacity of that prick in front of the American people announcing he was deciding whether or not a firm of this stature and this whatever was good enough to get a loan. ... This guy thinks he's got a big dick. He's got nothing, except maybe a boyfriend. ... Who the fuck asked you? You're not an elected officer. You're a clerk. Believe me, you're a clerk. I want to open up on this fucker, that's all I can tell you.

This is getting nasty. It may be time to go to the mattresses. As economies crumble and the center doesn’t hold, as poet W. B. Yeats wrote, things fall apart.

See more stories tagged with: global, economy, eastern europe, western europe, financial crisis

Danny Schechter writes the News Dissector blog for Media Channel. His latest book is Plunder: Investigating Our Economic Calamity (Cosimo Books).

Liked this story? Get top stories in your inbox each week from AlterNet! Sign up now »