Portugal’s bailout: European banking crisis deepens

[Hannah Bell]

The capitalist politicians, together with the mass media, continually work to present the so-called sovereign debt crisis as akin to the fate of an individual who, having gotten into financial difficulties, must now make sacrifices in return for financial assistance. The bailout of Portugal is the latest case in point. Announcing the decision of his caretaker government to seek emergency assistance from the European Union, Prime Minister Jose Socrates declared that he was seeking financial assistance for “our country” in the “national interest...”

The lead-up to Wednesday night’s announcement followed the now familiar pattern. First austerity measures were implemented which, it was said, would avert the need to seek a bailout. But the relentless pressure of the markets, rating agencies and the banks continued, culminating in the downgrading of Portuguese debt to near junk status and the announcement by the country’s banks that they could no longer take more government debt on their books.

One of the most profound scientific discoveries of Karl Marx was to show how the operations of the “free market” made it appear that systematic looting and robbery, and the accompanying impoverishment of masses of people, were the outcome of “natural events” for which there was no alternative. And so it was in this case. The steadily deepening crisis of Portugal’s finances over the past months, which appeared as the outcome of inevitable market forces, was an operation aimed at forcing the government to seek a bailout, and to ensure that losses incurred by the major European banks would be guaranteed by the state.

Immediately the bailout decision was announced, Portuguese banks celebrated as the price of their stocks rose by between 4 and 6 percent in Thursday’s trading. Massive amounts of money are at stake, together with the solvency of the entire European banking and financial system....One of the main reasons the European Central Bank, together with the German government of Angela Merkel, have opposed debt restructuring is the fear that any weakening of the European banks would be to the advantage of American banks that have been strengthened by the provision of massive funds and virtually zero interest loans by the US Federal Reserve.

http://www.wsws.org/articles/2011/apr2011/pers-a09.shtml