Tuesday

2nd Jun 2020

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

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

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.

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.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

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

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.

Vestager hits back at Lufthansa bailout criticism

Commission vice-president in charge of competition Margarethe Vestager argued that companies getting large capital injections from the state during the corona crisis still have to offset their competitive advantage.

German court questions bond-buying and EU legal regime

The German Constitutional court ordered the European Central Bank to explain its 2015 bond-buying scheme that helped eurozone stay afloat - otherwise the German Bundesbank will not be allowed to take part.

News in Brief

  1. Trump threatens to use army to crush unrest in US
  2. Trump wants Russia back in G7-type group
  3. Iran: Fears of second wave as corona numbers rise again
  4. WHO: Overuse of antibiotics to strengthen bacterial resistance
  5. Orban calls EU Commission recovery plan 'absurd'
  6. ABBA's Björn new president of authors' rights federation
  7. Malta and Libya to create anti-migrant 'units'
  8. France reopening bars and parks next week

Stakeholders' Highlights

  1. UNESDAHow reducing sugar and calories in soft drinks makes the healthier choice the easy choice
  2. Nordic Council of MinistersGreen energy to power Nordic start after Covid-19
  3. European Sustainable Energy WeekThis year’s EU Sustainable Energy Week (EUSEW) will be held digitally!
  4. Nordic Council of MinistersNordic states are fighting to protect gender equality during corona crisis
  5. UNESDACircularity works, let’s all give it a chance
  6. Nordic Council of MinistersNordic ministers call for post-corona synergies between economic recovery and green transition

Latest News

  1. Malta fiddles on migrants, as Libya burns
  2. Borrell: EU doesn't need to choose between US and China
  3. Post-Brexit and summer travel talks This WEEK
  4. State-level espionage on EU tagged as 'Very High Threat'
  5. Beethoven vs Virus: How his birthplace Bonn is coping
  6. EU's new migration pact must protect people on the move
  7. Spain takes 'giant step' on guaranteed minimum income
  8. Vestager hits back at Lufthansa bailout criticism

Join EUobserver

Support quality EU news

Join us