THE BANKING UNION - A DEBATE THAT IS A FIRST IN ROMANIA A drop of order, in a sea of chaos - 28.03.2014

• Presentation from the conference

The issue of the Banking Union is attracting the attention of an increasing number of players involved in the Romanian market, whether it is the authorities, representatives of lenders or of the real economy, as proven by the high number of attendees at the conference, held for the first time in Romania yesterday by BURSA.

A rather exotic topic to the domestic public, up until recently, the supranational structure intended to ensure a better coordination of the European banking system is seeing increased interest locally.

Which is natural, for at least two reasons: the massive presence of the foreign capital in the domestic banking sector and the desire of our authorities to be part of the Banking Union.

At the conference, some of the opinions expressed were in favor of the conference, while others were against it.

While the representatives of the International Monetary Fund (IMF), of the Government and of banks have spoken in favor of joining the union, the business sector has expressed reservations over its effectiveness in dealing with the problems that have carried Europe from one crisis to the next.

• 1. The financial evolution of the planet

The graph reveals how the increase of the planet's debt is greater than the increase of the GDP.

The planet is living using borrowed money.

We are living using credit.

But, taking out a loan is reasonable only when this leads to an increase in the value of the output to such an extent that it allows the repayment of the principal, of the interest rate and the making of a profit.

The planet isn't behaving reasonably.

To any auditor, this graphical divergence is the clear proof of the bankruptcy of the company being reviewed.

The Earth is in default.

In order to avoid acknowledging the default of the planetary financial system, the authorities everywhere are rolling over the debt and are adopting measures of financial repression.

Of course, the rollover of the debt is toxic, because it causes it to increase.

And the financial repression is just as toxic, as it causes the decrease of the cash available for repaying the debt.

• 2. Financial repression

The notion of "financial repression" was introduced in 1973, by two economists from Stanford (Edward Shaw and Ronald McKinnon), and it referred to the measures that the governments are taking to reduce sovereign debt.

The financial repression regime is characterized by the lowering of the interest paid on government bonds, together with the cutting of the interest paid by banks on deposits and by the increase of inflation, as expressed by the price consumer index.

The chart of these three ratios confirmed the fact that starting with 2008, in Europe the regime of financial repression has been instituted.

Another characteristic of financial repression is the fact that the banking sector stops \financing the economy, as the state becomes its favored customer, which in the European Union has already become a custom, with both parties becoming toxically consolidated, through the wide-scale bail-out operations, adopted following the American model.

In my opinion, the notion of "financial repression" should be amended to include "bail outs" and "bail-ins", with the former representing an immoral maneuver of despoiling the population, in order to keep alive the banking system that supports the states; and the latter is a despoiling that discourages saving, and even more so the business sector.

Besides, the cash-flow that is migrating from the European banking system to banks outside the European jurisdiction has apparently caused significant withdrawals from our banking system - specifically from those accounts that exceed the maximum guaranteed amount of 100,000 Euros.

Similarly, the idea promoted in February, by Deutsche Bank, of applying a wealth tax -but not in Germany - is part of the notion of "financial repression", as is the interest of the European Commission in using the savings of the 500 million European citizens to boost investments.

I am convinced that we live in a full regime of financial repression.

• 3. Will the European Banking Union end the financial repression or will it make it worse?

The European Banking Union would like to set up a central, continental level overseer and regulator, that goes beyond national borders. It also wants to create a last resort intervention fund, which would be used after the application of the bail-in measures and it is unclear whether, following the latest summit, it also would like to set up a common guarantee fund for the entire EU banking system.

What can be seen at first glance is that the European Banking Union represents an effort of becoming organized.

It could provide more stability to the continental banking system, in normal times.

But these are not normal times and I have revealed this in the first chart - output isn't keeping up with the debt and I am skeptical that the reorganization of the banking system could cause a change in the trend of the two diverging curves.

On the other hand, at a second glance, we can tell that the system of the European Banking Union, increases the distance to the place where the decisions on every bank get made, or standardizes these decisions, limiting the ability of the central banks to decide on a case by case basis.

I also am skeptical that, if the central banks, who knew the local conditions, were unable to prevent the local troubles, then the latter will not be preventable by a continental regulator, regardless of the existence of its pyramid-like structure and the common, single algorithms.

In fact, I think that such a concentration of the decision power actually helps reinforce the financial repression regime.

• 4. Our national identity

Honestly, I think that this is a favorable circumstance to find again our national identity, the feeling that we belong to a reasonable nation.

I think that we should stop looking at the foundations of the past, in the ancient words that have survived our Dacian heritage, in the "Mioriţa" poem, in rulers like Mihai Viteazu or Ştefan cel Mare - and look in the foundations of the future.

I think that the situation is an opportunity for us, the ones who have stopped respecting ourselves and write books like "Why is Romania different"?

I think that indeed, we all want to be part of the European Union, I think that we all want to be able to travel across the continent without obstacles; but I don't think that anyone wants to pay for that with the price of having their life savings stolen.

After all, traveling without restrictions is a natural right.

One doesn't have to pay for it.

I think that we need to stop when we find that our European brethren are getting closer to an unavoidable disaster at an accelerated speed.

We have the advantage of being a nation that has not only secularized the Christian values, but has actually remained Christian through its own faith.

I think it would be wise, for us to research the Christian foundations of this civilization based on credit and to understand why the Christian writings prohibit it.

It would truly be our contribution to the European family, it would shape our future national identity.

And it would perhaps solve the global crisis, thus shaping up a different kind of civilization.

Which is natural, for at least two reasons: the massive presence of the foreign capital in the domestic banking sector and the desire of our authorities to be part of the Banking Union.

At the conference, some of the opinions expressed were in favor of the conference, while others were against it.