According to the Financial Times, the ECB will use ‘special purpose vehicles’ to issue Eurozone bonds using almost 60% of the 750bn Euros.
Funds raised will then be used to support bankrupt countries who would otherwise find it impossible or extremely costly to raise finance on the open market.
SPVs have been widely recognised as a major weakness in the capitalist financial system. SPVs are the principal means by which the riskiness of loans are concealed and on the back of which risky lending has massively expanded and has contaminated the whole financial system binging it on the verge of collapse in 2008.
The proposed Eurozone SPVs will aim to hide loans to bankrupt European states by mixing them together with various other loans in order to lower the cost of borrowing. Due to the way in which the insidious debt market works, these new loans will be used by vulnerable nations to finance more debt.
This is a recipe for disastrous contagion at the level of sovereign states - as happened at the level of financial institutions barely three years ago.
What’s more the ECB is the European banking regulator with the primary role of guaranteeing the stability of the financial system. Who would trust the gamekeeper that adopts the crooked practices of the poachers?
For all the hyperbole following the financial crisis about an ensuing radical change in the financial system this move by ECB foretells that there will be little change in the ways and means by which Capitalism endangers everyone.
The veneer of affluence has rubbed off to reveal extremely indebted western nations with inefficient economies, heavily dependent on the burgeoning public sector which in turn is weighed down by social breakdown.
The SPVs hide a nations bad debts under the carpet and only delay the inevitable, bankruptcy. The real injustice is that the weak and most vulnerable in society, who never really benefited from the false prosperity, are the ones now suffering and will suffer for generations to come due to the failure of capitalism.
Many among the educated classes in the Muslim world were once infatuated by the west but now see in detail the inherent flaws in capitalism and its failed model of debt financed economic growth. It is merely a matter of time before Allah (swt) gives the victory for the re-establishment of the Khilafah, which will be a beacon of light for mankind and an example of sustainable growth as it once was for over a thousand years. (Ends/)
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