• Taxpayers and small savers in Spain are paying for the Bankia fraud (Photo: Carlos Blanco)

EU 'aware' that Spanish bailout did not protect fraud victims

16.04.13 @ 17:11

  1. By Valentina Pop
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The EU commission is "aware" that a bailout agreed with the Spanish government means thousands of people will never get their savings back, but says it is up to courts to help the conned depositors.

  • A protester in Sevilla who lost his savings in the Bankia 'preferred shares' scheme (Photo: Clara Morales)

For almost a year now, thousands of people have protested in Spanish cities and villages, in front of the banks that got most of the country's bailout.

Their message: "We want our money back."

A series of legal cases have been brought to court, with the help of a campaign called 15MpaRato, which was part of the broader "Indignados" movement against corrupt politicians responsible for Spain's economic boom and bust.

According to the financial consumer association in Spain, over 120,000 families were persuaded to buy so-called preferred shares in their local banks without being told about the risks of this financial product.

Last week, a document from the Spanish financial regulator obtained by El Diario newspaper revealed that small depositors had indeed been conned.

The "preferred shares" sold to regular bank customers as a safe investment was not only highly risky, the paper says, but also illegal because there was no proper market for doing it.

The document puts the regulator in a bad light too, as it previously approved the sale of the same shares it has now found to be dodgy.

Meanwhile, Spain's anti-corruption prosecutor has started an investigation into the way preferred shares were sold to unaware bank customers.

Cue the European Union

When it negotiated the terms of Spain's up-to-€100-billion bailout for its ailing banking sector, eurozone finance ministers, the European Commission and the European Central Bank (ECB) said these banks should impose losses on their shareholders.

In theory, these shareholders should be rich investors or other banks. In practice, they are tens of thousands of people from rural areas, pensioners, parents saving for their children who were tricked by their local "cajas" - the savings banks later merged into Bankia - to change their deposits into these "preferred shares."

Asked to what extent the EU commission was aware of this at the time when it negotiated the deal, Simon O'Connor, spokesman for the economics commissioner, told this website:

"The commission has been aware that both institutional and retail investors have been or will be affected by this measure," O'Connor said.

"The commission has also been aware of allegation of some misselling of some of these preferential shares. In the Commission’s view this is up to the Spanish courts to assess these claims and provide for remedial action if appropriate," he added.

He explained that the participation of bank shareholders in the bailout was a condition for the rescue package in order to protect Spanish taxpayers from an even larger "burden."

But the 15MpaRato campaigners are not convinced.

The campaign took its name from 15 May 2011 - the day the protests began - and the head of Bankia, Rodrigo Rato, whom they have taken to court along with the entire board of directors who oversaw the "preferred shares" scheme.

"The current government and the European Commission have the same responsibility, they were aware of the mess but instead to solving it, they tried to cover it up," a campaign member told this website.

With the EU commission and the ECB approving the transfer of eurozone funds to the Spanish government, they still wield a lot of power on how money is used, 15MpaRato argues.

Winning this informal class action on behalf of the dozens of thousands of people is also a David against Goliath task, as top politicians were involved: Rato, the former Bankia chief, was minister of economy in the conservative government of Jose Maria Aznar until 2004 and then head of the International Monetary Fund until 2007.

If convicted, the Bankia board members could face up to six years in prison.

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